Is the Domestic Auto Sector Facing a Crisis? open the window of AOD

Write : 2017-07-16


Concerns are rising of a triple crisis in the automotive industry as exports, domestic demand, and production are all down.
Smaller shipments have reduced Korea's share in the world's top three auto markets. Lackluster demand at home has also decreased output to a 7-year low.
All indicators of auto sector performance have retreated to the levels of 7 to 8 years ago.
According to the Korea Automobile Manufacturers Association, 1.3 million South Korean vehicles were exported in the year's first half, the lowest in 8 years since 940-thousand units were exported in 2009.
The export volume of fully built domestic cars posted on-year minus growth in the first half of 2017, marking the third straight year of negative growth for the January to June period.
Domestic demand is also slowing. Some 785-thousand units were sold at home in the first 6 months, down 4 percent from the same period last year.
Production has also plunged to a 7-year low. Over 2.16 million vehicles were manufactured in the first half, 1.5 percent less than last year and the lowest since 2010.
Various negative factors are being blamed for the downturn.
The most evident is Beijing’s retaliatory measures over Seoul's deployment of the THAAD missile defense system. Sales of Hyundai and Kia cars have dropped 40 percent in China.
But more importantly, a long-term, fundamental issue is the lack of focus on R&D investment and production efficiency, while the auto sector was achieving fast-paced growth.
Korea's market share in the top 3 global markets is faltering.
First in China, South Korean autos commanded a share as large as 9 percent in 2014, but this slipped to 4 percent this year. THAAD retaliation played a big part but it's also because Chinese automakers have increased their share at home.
In the U.S., Korea's market share reached nearly 9 percent in 2011 but fell to 7.6 this year. In Western Europe, the Korean share of the market is at a standstill of about 5.7 to 5.9 percent for the past 6 years. Meanwhile, Japanese brands have steadily raised their share in these big 3 markets.
The triple crisis in the Korean automotive sector is ultimately due to weakened competitiveness. Prospects are dim, especially in the export front in the year's second half due to slowing demand in the U.S., among other reasons.
Experts believe the domestic auto sector has lost steam and is facing a crisis.
Industry players are urged to not solely look to emerging markets but also work to defend their market status in advanced economies, which are the battleground of the latest technologies. For this, carmakers, labor unions, and partner firms must make concerted efforts alongside better government policies.

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