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South Korea Autos Report Q4 2009
Market |
Automotive and Parts |
Report Type |
Market Research |
Country |
South Korea |
Published |
9 September 2009 |
Number of Pages |
48 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
Vehicle production in South Korea is expected to reach only 3.18mn CBUs in 2009
This report has revised its production forecast for 2009 to a more bearish prognosis this quarter. We now predict that vehicle production in South Korea (which is largely directed toward exports) will reach only 3.18mn CBUs in 2009, compared to our earlier forecast of 3.68mn (and actual output of 3.83mn in 2008).
This translates into an annual fall relative to 2008 of 17%. This revision is in light of data for the first six months of the year. Total production of cars and commercial vehicles in South Korea in H109 reached just 1.53mn, according to figures from the Korea Automobile Manufacturers Association (KAMA). This comes despite the strength of profits registered by both Kia and Hyundai in the second quarter (see Company Profiles). Hyundai’s strong performance is largely attributable to overseas production activity, as well as a weaker won, which has increased local currency earnings for both Hyundai and Kia from their export-oriented production in South Korea.
The current situation with regard to local sales is less bearish than that for production. Total sales of new vehicles in the domestic market totalled 1.15mn in 2008. In H109, passenger car sales registered 516,191 units, while sales of commercial vehicles totalled 103,485 units. Taken together this resulted in the sale of 619,676 units, or an annual equivalent of 1.24mn units (although this obviously does not take into account seasonal peaks and troughs in demand). However, South Korea’s domestic economy is showing signs of holding up, despite the global economic downturn. The South Korean economy expanded 2.3% quarter-on-quarter (q-o-q) in Q209, fuelling hopes of a more rapid recovery than previously expected. As such, we now predict that new vehicle sales in the domestic market across 2009 will undergo only a small contraction of 4%. If this forecast is borne out, it will result in total new vehicle sales in South Korea in 2009 of 1.10mn units.
We update our company analysis this quarter to evaluate the strengths and weaknesses of South Korea’s two leading carmakers Hyundai and Kia, while also focusing on opportunities and threats to their future performance. Both companies generated excellent Q209 results, as Kia garnered a net profit of KRW347bn, and Hyundai ammased net earnings of KRW812bn, with the latter benefiting from its exposure to the robust Chinese and Indian markets, where it has established production bases. The key driver of Kia’s strong performance was a weak won, enabling it to generate significant local currency gains from producing vehicles in South Korea which are primarily sold in overseas markets.
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