S. Korea’s car production in 2019 likely to fall below 4 million units

South Korea’s annual car production in 2019 will likely fall below 4 million units for the first time in a decade due to stagnant auto demand from a sluggish global economy and repeated local labor disputes.

According to the Ministry of Trade Industry and Energy on Friday, Korea’s auto production by five major finished vehicle manufacturers reached 3,613,077 units in the first 11 months of this year, down 1.6 percent from the same period a year ago. Based on the latest figure, car production for full 2019 is estimated to stop at around 3,960,000 units, missing the 4 million-unit mark for the first time since 2009 when overall auto production reached around 3,510,000 units in the aftermath of the global financial crisis.

Of Korea’s five major finished car producers, top automaker Hyundai Motor churned out 1,620,000 vehicles in the January-November period, up 2.3 percent from the same period a year ago, thanks to brisk sales of sport utility vehicles (SUV) such as Venue, Kona, and Palisade. Total output by its smaller sibling Kia Motors Corp., however, fell 0.2 percent during the same period due to the base effect of brisk sales from last year. Many people had also delayed their purchases for the release of Kia’s new cars later this year.

Total output of GM Korea Co., the Korean unit of U.S. auto giant General Motors Co., fell 8.2 percent during the cited period, Renault Samsung Motors 24.2 percent, and Ssangyong Motor 6.2 percent.

Overall output at GM Korea fell due to a decline in production of Trax subcompact crossover SUV and the halt in export orders bound for the European market. Renault Samsung Motors Corp. saw new vehicle output decrease due to a cut in production of Nissan Rogue, while Ssangyong Motor Co. owned by India’s Mahindra & Mahindra Ltd. logged 100 billion won in operating loss in the July-September period.

An unnamed official from the trade ministry noted that the global auto industry is facing restructuring and carmakers across the world are focusing more on premium products such as sport utility vehicles or medium and large sedans. Production at GM Korea and Renault Samsung Motors whose parent companies are going through massive restructuring, has also dropped significantly, weighing on Korea’s overall auto output.

On top of falling demand, ongoing labor conflicts have also affected overall car production in Korea, industry observers said. Especially, Renault Samsung’s union is threatening to go on strike again only a few months after they ended a year-long labor and management disputes.

In November alone, Korea’s overall auto production fell 11.3 percent from the same month a year ago. Domestic demand was down 1.3 percent and exports 8.6 percent during the same period.

On the contrary, sales of import cars in Korea increased 8.9 percent. Sales of Japanese cars even recovered surpassing 2,000 units in November for the first time since July when Korean consumers began to boycott Japan-made goods including cars after Tokyo tightened its export regulations against Korea.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]