Led by Hyundai Motor, South Korea’s car makers increased sales 7% year-on-year in January on surging exports, but analysts warned that tough US competition and sluggish domestic sales could mar prospects for the full year, Reuters reported.


South Korea may now be the world’s fifth-largest producer of cars, behind the United States, Japan, Germany and France, but the country’s manufacturers now face heavyweight rival General Motors leading a relentless price war in their key US export market and a strong Korean currency making their products more expensive, Reuters said.


Japanese rivals face a similar fate with car demand expected to be sluggish this year despite a rise in sales in January, helped by the launch of new models, Reuters added.


According to Reuters calculations, the five South Korean five car makers — Hyundai, KIA, GM Daewoo, Renault Samsung and Ssangyong  — sold a combined 298,000 vehicles in January, up 7% from 278,800 a year ago.


Reuters said the largest maker, Hyundai, increased sales almost 3% in January from a year earlier to 156,222 units, driven by brisk exports of popular Santa Fe SUVs and EF Sonata saloons.


According to Reuters, analysts say that Detroit’s Big Three car makers — GM, Ford and Chrysler — hold more financial ammunition in a price war, undermining Korean car makers’ cost advantage and competitive warranties.


Reuters noted that Hyundai said last week that it planned to cut interest rates on financing deals in the US for EF Sonata sedans and Santa Fe SUVs to counter incentives offered by top car makers.


Hyundai exports for January rose 10.5% from a year ago to 95,567 units, while domestic sales slipped 7.2% to 60,655 compared with the previous year, Reuters said.


The news agency said Hyundai ranked seventh in US car sales at the end of January, accounting for a 2.5% share of the world’s largest car market, and is expected to post a record fourth-quarter profit later this month, driven by strong domestic sales and exports of high-end cars.


According to Reuters, Hyundai affiliate Kia, South Korea’s second-largest car maker, increased sales last month by 23% year-on-year to 86,712 units on healthy export growth.


Renault Samsung sold 11,407 vehicles in January, up 22% from a year ago, Reuters said.