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Customer LoginsSouth Korean OEMs' global sales decline in January; domestic market to remain flat in 2017 according to IHS Automotive
A sluggish macroeconomic situation and a high level of political risk will keep vehicle sales in check during 2017 in South Korea, IHS Automotive forecasts.
IHS Markit Perspective:
- Significance:The five major South Korean automakers recorded mixed sales performances during January in global markets. Kia endured a difficult period, while GM Korea's sales also fell, but Hyundai, Renault Samsung, and SsangYong all managed to post positive results.
- Implication:The automakers have revealed their growth plans for 2017, planning to bring out new vehicles in order to achieve their targets.
- Outlook:IHS Automotive forecasts that light-vehicle sales in South Korea will remain flat at 1.8 million units in 2017, mainly due to a sluggish economic situation and political risk.
South Korea's automakers reported a combined 1.2% year-on-year (y/y) decline in global sales in January to 618,930 million units, mainly due to slowdowns in both their domestic and overseas markets, according to data released by the Yonhap News Agency. Of the total, overseas sales accounted for 512,720 units, down 1.4% y/y, while domestic sales stood at 106,210 units, slipping by just 0.1% y/y.
Hyundai sold a total of 342,607 units globally in January, up 1.3% y/y. Its domestic sales declined 9.5% y/y to 45,100 units, while its sales in overseas markets rose 3.1% y/y to 297,507 units.
Kia, meanwhile, posted a 7.0% y/y sales decline during the month to 198,805 units, split between a 9.1% y/y decrease in domestic sales to 35,012 units and a 6.5% y/y fall in overseas shipments to 163,793 units.
General Motors (GM) Korea, which is 17.02% owned by the Korea Development Bank, sold 46,842 units in January, down 4.8% y/y, with domestic sales of 11,643 (up 25.0% y/y) and overseas sales down 11.8% y/y to 35,199 units, mainly due to the Chevrolet brand's withdrawal from European markets two years earlier. Separately, GM Korea plans to stop production of the Chevrolet Orlando multi-purpose vehicle (MPV) in South Korea, according to report by the Business Korea Daily. The automaker also plans to import the Chevrolet Equinox sport utility vehicle (SUV) into South Korea instead of producing it in the country. The discontinuation of production of the Orlando is because an increasing number of consumers now prefer SUVs to MPVs and the model's engine and transmission have to be overhauled for the model to satisfy fuel economy regulations, says the automaker. Meanwhile, the decision to import the Equinox is largely due to the huge investment that is required for changes to manufacturing facilities, as well as cost factors.
Renault Samsung was the fourth largest-selling automaker in South Korea last month with total sales of 35,012 units, up 34.8% y/y. The automaker reported a 254.1% y/y increase in domestic sales during January to 7,440 units, while its overseas sales fell 0.8% y/y to 12,816 units. In January, SsangYong posted total sales of 10,420 units (up 3.4% y/y), lifted by a 6.8% y/y surge in domestic sales to 7,015 units, which helped offset a 3.0% y/y decline in overseas sales to 3,405 units.
Outlook and implications
South Korean automakers have already declared their growth plans for 2017. Hyundai, along with its affiliate Kia, aims to sell around 8.25 million units globally in 2017, up 4.9% y/y from the 2016 sales figure of 7,868,025 units. GM Korea expects its South Korean sales to exceed the 180,257 units it sold in 2016, while Renault Samsung Motors has announced that it is aiming to sell 270,000 units during 2017 globally, up 5.1% y/y. Meanwhile, SsangYong aims to achieve a 3.5% y/y increase in its global sales to 161,000 units in 2017. The automaker expects that this growth will come on the back of the rising popularity of its Tivoli nameplate. SsangYong has not provided a breakdown of its expected 2017 sales by market.
New light-vehicle sales in South Korea are expected to remain practically flat at 1.8 million units in 2017, a marginal decline of 0.2% year on year (y/y), according to IHS Automotive light-vehicle sales forecast data. Sales in the largest segment, passenger vehicles, are expected to grow marginally by 0.2% y/y to 1.6 million units during 2017, while light commercial vehicle (LCV) sales will register a 2.9% y/y decline to 197,315 units.
This forecast moderate decline can be attributed to a weaker macroeconomic environment, as well as political risk. Compared with 2016, GDP and private consumption are expected to fall in 2017. According to IHS Markit data, South Korean GDP is expected to grow by 2.7% in 2017, down from 2.8% in 2016. Moreover, around the second or third quarter, South Korea is due to hold a presidential election. This implies that the economy will be troubled by a couple of factors, resulting in uncertainty for investments and expenditures, according to IHS Automotive's South Korean light-vehicle sales forecasting analyst, Andy Bae.
Hyundai, along with its affiliate Kia, will continue to lead the South Korean new light-vehicle market in 2017 with a combined market share of 65.3%. At Hyundai, including its premium Genesis brand, light-vehicle sales are expected to grow by 6.3% y/y in 2017 to 655,039 units. Of this total, the Genesis brand is expected to witness a 25.2% y/y decline to 17,974 units. The growth in Hyundai's domestic sales will come on the back of the next-generation Grandeur sedan launched in November 2016, according to Bae. The vehicle is forecast to register 66.7% y/y sales growth this year to 107,532 units, up from a 2016 figure of 64,506 units. Meanwhile, affiliate Kia's sales in the country will decline by 7.0% y/y to 499,814 units this year. In 2016, Kia introduced two new vehicles in the country, the Niro SUV and K7, which helped the automaker to post higher sales. The K7, launched in January 2016, has already had its main growth spurt in the country. As a result, the sales boom for Kia has gradually waned and sales are likely to fall this year.
Sales of the third-largest domestic automaker, GM Korea, are forecast to decline by 1.9% y/y to 180,773 units in 2017. Renault Samsung's sales are expected to grow modestly by 0.4% y/y to 111,092 units, just enough to keep it ahead of SsangYong. The latter is likely to close 2017 with sales of 102,837 units, up 0.4% y/y.
The E-Car category is expected to remain the best-selling segment in South Korea in 2017, with sales of 295,011 units, up 6.8% y/y, giving it a market share of 16.4%. The segment is likely to be led by Hyundai's next-generation Grandeur. The D-car segment will follow as the second-largest category with a market share of 14.6%, although its sales are expected to decline 10.2% y/y to 262,062 units. Much of the segment's growth is expected to come from the Hyundai Sonata. During the year, the D-SUV segment is expected to be the third best-selling category with a market share of 11.6% and sales of 208,408 units, down 4.8% y/y. This segment will be led by the Kia Sorento.
Another prominent trend in South Korea is the emergence of B-segment SUVs. The surge in the number of models in the compact SUV categories has lured younger customers in South Korea who prefer the smaller, more fuel-efficient models with affordable price tags over more traditional A- and B-segment vehicles. The segment has also attracted customers from the C-Car segment.
According to our data, the South Korean B-SUV category grew from 15,896 units in 2014 to 77,275 units in 2016. The segment's market share went up from 1.0% in 2014 to 4.3% in 2016. A total of nine nameplates were sold in the B-SUV segment during 2016, compared with just six in 2016. Ssang Yong's Tivoli is the segment leader, and new additions to the segment include the Fiat 500X, Honda Vezel, and SsangYong Tivoli Air (a longer-wheelbase version of the Tivoli). Hyundai Group's only player in the B-SUV segment, the Kia Soul, will be joined by both Hyundai and Kia versions of a B-SUV model (B-CUV in our database) in 2017, which will help the group to capture a forecast 34.8% share of the B-SUV segment during the year, up from 2.9% in 2016. We expect the B-SUV segment to grow by around 47% y/y to 113,630 units in 2017.
Furthermore, sales of eco-friendly vehicles, including electric vehicles (EVs), hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs), and fuel-cell electric vehicles (FCEVs), are growing in South Korea. The confidence of South Korean automakers and buyers in alternative powertrains has been boosted by the government's commitment to spend KRW150 billion (USD125.9 million) in assisting the research and development (R&D) of alternative-powertrain vehicles during 2016-20. It aims to have about 820,000 HEVs, 200,000 EVs, 50,000 PHEVs, and 9,000 FCEVs on the country's roads by 2020. It is also looking to have nearly 1,400 EV charging stations and 80 hydrogen fuel stations in place across South Korea by 2020. During January to October 2016, sales of such vehicles in the country grew by 63.8% y/y to 53,631 units. Of the total, HEVs led the way with 50,544 units (up 68.1% y/y), accounting for 94.2% of the total alternative-powertrain vehicles sold in the country. The limited range of EVs, combined with an inadequate infrastructure, is believed to be one of the main reasons behind the slow uptake of these vehicles. However, the launch of the extended-range Chevrolet Bolt EV, along with the government's move to improve the charging infrastructure, will bring about an increase in EV sales in the country. According to IHS Automotive light-vehicle powertrain forecasts, production of plug-in vehicles, which include EVs and PHEVs, will grow to 75,109 units in South Korea in 2017, up from an estimated 19,960 units in 2016. This is expected to grow further to 107,763 units by 2020.
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.