The South Korean new vehicle market grew in September for the third consecutive month, mainly thanks to new model launches and a low base of comparison.
IHS Markit perspective
- Significance: New vehicle sales in South Korea by the five domestic automakers surged 20.1% y/y to 133,551 units during September.
- Implications: Most of the South Korean automakers posted growth in the domestic market last month, primarily thanks to new model launches and a low base of comparison due to long Chuseok holidays which fell in September last year compared to October this year and labour issues.
- Outlook: IHS Markit forecasts that light-vehicle sales in South Korea will come in at 1.76 million units in 2017, down 1.3% y/y, subdued by a relatively sluggish macro-economy and political uncertainty.
New vehicle sales in South Korea by five domestic automakers, including Hyundai, Kia, General Motors (GM) Korea, SsangYong and Renault Samsung, surged 20.1% year on year (y/y) to 133,551 units during September, according to figures released by the five domestic vehicle manufacturers, and data compiled by IHS Markit. For the year to date (YTD), vehicle sales in the country stand at 1.16 million units, up by 1.1% y/y.
Hyundai and Kia maintained their lead of the market in September with a combined share of 80.7%. Hyundai's sales totalled 59,714 units during the month, surging by 43.7% y/y, while affiliate Kia's sales jumped 25.4% y/y to 48,019 units. Sales of SsangYong grew 18.2% y/y to 9,465 units. Meanwhile, GM Korea sales plunged 36.1% y/y to 8,991 units and Renault Samsung fell 20.2% y/y to 7,362 units.
For the YTD, Hyundai's sales total 518,671 units, up 7.5% y/y, while Kia's sales are down 2.0% y/y at 388,500 units. GM Korea has posted a 19.9% y/y decrease to 102,504 units. With an 8.0% y/y gain to 79,847 units, SsangYong is ahead of Renault Samsung, which has recorded sales growth of 5.6% y/y for the YTD, taking its tally to 75,172 units.
Outlook and implications
Most of the automakers – except for GM Korea and Renault Samsung – witnessed growth during September, mainly thanks to new model launches and a low base of comparison. During September 2016, these automakers recorded a combined 13.2% y/y decline in sales to 111,159 units, mainly due to industrial action over wage negotiations and a shorter working month because of long Chuseok holidays which fell in September last year compared to October this year.
Hyundai attributed the surge in sales during September to strong demand for the newly launched Kona sport utility vehicle (SUV) and to a low base of comparison. Affiliate Kia said that the growth during the month came on the back of robust demand for SUV models such as the new Stonic and Soul. SsangYong posted growth in the domestic market mainly on the back of the growing popularity of its Tivoli SUV and the newly launched G4 Rexton SUV.
Meanwhile, the decline in Renault Samsung and GM Korea sales during the month can be attributed to sluggish demand for their vehicles. In a bid to boost its sales, Renault Samsung has added a gasoline (petrol) variant of the QM6 SUV and special edition of the QM3 SUV to its line-up. The automaker has also revealed a refreshed version of the SM3 sedan. In an effort to expand its sales in the country, GM Korea has launched refreshed versions of the Malibu sedan and Spark hatchback. It has also expanded the Trax SUV line-up with a new variant.
The South Korean OEMs are banking on new models to bolster sales in their home market. They have either launched or plan to bring out a raft of new models in 2017. However, a sluggish macroeconomic situation and political risk will keep vehicle sales in check during 2017. South Korea held a presidential election on 9 May. As economic plans are established by the new administration, policy stability will be affected. As the economy remains sluggish, this will cause uncertainty for investment and expenditure, according to IHS Markit's South Korean light-vehicle sales forecasting analyst, Andy Bae. The overall macroeconomic outlook will not recover easily, and individual households will suffer from a high debt burden and will probably see their purchasing power reduced because of the recent political risks.
IHS Markit forecasts that light-vehicle sales in South Korea will come in at 1.76 million units in 2017, a decline of 1.3% y/y. This will be split between passenger vehicle sales of 1.55 million units (down 2.2% y/y) and light commercial vehicle (LCV) sales of 208,982 units, up 5.9% y/y.
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The above article is from AutoIntelligence Daily by IHS Markit. AutoIntelligence Daily provides same-day analysis of automotive news, events and trends. Get a free trial.