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Customer LoginsNew vehicle sales in South Korea gain 15.7% y/y in June
New vehicle sales in South Korea grew 15.7% y/y during June on pre-emptive buying ahead of the end of special consumption tax (SCT) relief at the end of the month.
IHS Automotive Perspective
- Significance: New vehicle sales in South Korea rose 15.7% y/y to 184,497 units during June.
- Implications: Domestic sales in June improved primarily due to the scheduled end of special consumption tax (SCT) relief on vehicles at the end of the month, which resulted in demand being pulled forward.
- Outlook: IHS Automotive expects the end of the SCT relief to hit local sales, although this will offset by new model launches, sales promotions, and discounts. We forecast that light-vehicle sales in the country will grow by around 4% y/y to 1.88 million units in 2016.
New vehicle sales in South Korea rose 15.7% year on year (y/y) during June to 184,497 units, up from 159,493 units in June 2015, according to a report by the Yonhap News Agency and compiled by IHS Automotive. The tally for June 2016 includes imports of 23,435 units. For the year to date (YTD), total vehicle sales are up 9.2% y/y at 929,015 units.
Hyundai and Kia maintained their lead in the South Korean vehicle market in June with a combined market share of about 66.4%. Hyundai posted an increase of 11.4% y/y in monthly sales to 69,970 units, while affiliate Kia recorded a gain of 16.7% y/y to 52,506 units. The third-largest domestic automaker, General Motors (GM) Korea, registered a 47.6% y/y surge to 18,058 units. Renault Samsung's sales soared 59.6% y/y to 10,778 units while SsangYong reported a sales increase of 15.8% y/y to 9,750 units on the back of strong sales of Tivoli and Tivoli Air sport utility vehicles (SUVs).
For the YTD, Hyundai's sales improved 4.5% y/y to 351,124 units, while Kia's sales swelled 14.1% y/y to 276,750 units. GM Korea posted a 21.6% rise to 86,779 units. With an 11.6% y/y gain to 50,696 units, SsangYong was ahead of Renault Samsung which turned in the strongest sales growth of 33.2% y/y, taking its YTD sales tally to 46,917 units.
Imported vehicle sales fell 3.5% y/y to 23,435 units in June, accounting for about 12.7% of new vehicle sales in the country, according to data released by the Korean Automobile Importers' and Distributors' Association (KAIDA). By brand, BMW was the best-selling imported manufacturer in South Korea during the month, although its sales declined 16% y/y to 4,820 units. Mercedes-Benz posted monthly sales of 4,535 units (up 8% y/y), Audi recorded 2,812 units (up 31% y/y) and Volkswagen (VW) 1,834 units (down 58% y/y). For the YTD period, sales of imported vehicles in the country slipped 2.6% y/y to 116,746 units.
Outlook and implications
Light-vehicle sales in South Korea continued to record strong growth during June, mainly due to the scheduled end of SCT relief on vehicles at the end of the month, which resulted in demand being pulled forward.
During the month, Hyundai continued to post strong growth for the second consecutive month. Hyundai attributed the improvement in June to strong demand for sedans and sport utility vehicles (SUV). Affiliate Kia continues to outperform the overall market. GM Korea and Renault Samsung are still recovering from last year's low levels while SsangYong is capitalising on higher demand for SUVs. Meanwhile, the decline in imported vehicles during the month was largely due to widening probe into diesel emissions scandal. The South Korean government has rejected Volkswagen's (VW) recall plan for a third time, owing to VW Korea's refusal to admit to using defeat devices in engines to manipulate emission test results. VW's first two recall plans submitted in January and March, respectively, were rejected on the grounds that they provided insufficient information.
The South Korean government also accused Nissan of manipulating emissions figures for diesel Qashqai SUV. Nissan Korea denied the ministry's allegations and has filed a lawsuit against South Korea's Ministry of Environment, seeking nullification of the ministry's accusations.
Going forward, KAIDA has maintained a conservative sales forecast for imported vehicles in 2016 because of lower demand for foreign diesel vehicles in the wake of emission issues. The association forecasts an 8.5% y/y increase in sales of imported vehicles in South Korea during 2016, down from double-digit percentage gains in recent years. Nevertheless, this also appears ambitious considering the 2.6% decline in sales volumes of imported vehicles in the first six months of 2016.
To increase their market share in the country, several automakers have revealed plans to launch new models during the 2016 Busan International Motor Show. Hyundai showcased the G80, the next-generation model of the existing Hyundai-brand Genesis luxury sedan. The model is expected to go on sale in July in the domestic market. Kia unveiled a plug-in hybrid electric version of its K5 sedan and a hybrid electric version of its K7 sedan. These variants are expected to hit the market in the second half of 2016. GM Korea exhibited its second-generation Chevrolet Volt and its Chevrolet Camaro SS. Both vehicles are expected to go on sale in South Korea in the second half of 2016. Renault Samsung displayed its all-new QM6 SUV (the successor to the QM5 SUV), designed to meet the growing demand for SUVs in the country. The automaker plans to launch the QM6 SUV in September. According to IHS Automotive data, around 21 new or refreshed models are expected to be launched in the coming months. Another short-term boost is likely to come from the discounts automakers are offering to capture market share following the end of the tax relief on vehicles.
While the pre-emptive buying helped the market in June, IHS Automotive expects the end of the SCT relief will result in a slump in local sales in the coming months. Nevertheless, this will be offset by new model launches, sales promotions, and discounts. We forecast that light-vehicle sales in the country will grow by around 4% y/y to 1.88 million units in 2016. Passenger car sales in the country are expected to be led by the Hyundai Sonata with 98,204 units, despite a forecast 12.7% y/y decline this year. The E-Car category is expected to be the best-selling segment this year with sales of 319,091 units (up 22.5% y/y) and a market share of 19.3%.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.