South Korea Autos Report Q1 2008

South Korea's new vehicle sales are on track to meet the 1.22mn units forecast by BMI for 2007. In October 2007, domestic sales by the five national manufacturers grew by 7.7% y-o-y to 105,841 units.

Compared with previous months of the year, October's domestic sales also showed a return to month-onmonth growth. Sales were up by 15.2% from the 91,904 units recorded in October 2006, and recorded the highest monthly sales since the 106,267 units sold in June. For the period January-October 2007, domestic sales stood at 1,001,417 units, up 6.8% from the first 10 months of 2006.

International trade is also restoring the market to health with exports for the year to October running at 8.8% higher than the same period of 2006 at 2.310mn units. Indeed, October's exports were the highest overseas monthly sales of the year so far, rising 38.4% from September. On the other hand, sales by imported brands in South Korea are up by 32% for the 10-month period. This has led BMI to raise its forecast for imported sales to 52,689 units for 2007, representing growth of 30% y-o-y. This would mean imports of over 80,000 units by 2012, accounting for over 5% of total sales.

Despite the healthy outlook for the market, South Korea still ranks mid-table in BMI's Business Environment Ranking for the automotive industry in the Asia Pacific region. While much of this is down to the strong performances of other markets in the region, the country's high level of vehicle ownership also restricts the market's growth potential. The country's CBU output potential also receives a low score as domestic carmakers turn more towards overseas plants than producing for export. Annual disruption to production schedules by strikes resulting from wage negotiations also act against South Korea in terms of its regulatory environment.

Hyundai continues to lead the market among domestic manufacturers, although affiliate Kia is enjoying significant growth to rank a firm second. GM Daewoo, which is becoming a global hub for US carmaker General Motors for certain market segments, follows in third and could pose a serious threat as it continues to post double-digit sales growth. Among imported sales, premium brands are among the most popular, with Lexus leading the imported market for the year to October with a market share of 14%, followed by BMW and Audi on 13.84% and 9.47% respectively. The strongest growth over the 10-moth period came from another luxury brand, Bentley, with sales up from four units in 2006 to 78 in the year to October 2007.