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March 26, 2003

SOUTH KOREA: War over three months would cut vehicle demand – report

A protracted war in Iraq could deal a blow to the car industry in Korea, an automobile trade association report said, according to the Korea Herald. The Korea Automobile Manufacturers Association (KAMA) report forecast that if a war in Iraq lasts more than three months, domestic vehicle production will fall by 9.5%, or 300,000 units, to 28.5 million units, the paper said.

By bcusack

A protracted war in Iraq could deal a blow to the car industry in Korea, an automobile trade association report said, according to the Korea Herald.

The Korea Automobile Manufacturers Association (KAMA) report forecast that if a war in Iraq lasts more than three months, domestic vehicle production will fall by 9.5%, or 300,000 units, to 28.5 million units, the paper said.

Domestic demand for Korean vehicles is expected to further drop by 7% this year from a year ago to 14.5 million units, while exports bound for the United States, Western Europe and the Middle East are also expected to decrease by 7% this year from a year ago to 14 million units, said the report.

By contrast, if the U.S.-Iraq war ends quickly, the report expects domestic car production to pick up by 1.7%. The figure could be over 5% if the U.S. and European economies show signs of a rapid recovery after the war, added the report.

The report recommended that the government come up with proper countermeasures to cushion the economy from the negative effects of a prolonged war in Iraq.

The measures, the report suggested, could include the streamlining of automobile taxation, as well as stabilising oil prices through more flexible taxation methods of transportation and encouraging the using fuel-efficient cars, the Korea Herald reported.

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