South Korea Recorded Its First Automobile Trade Deficit with China

The Korea Institute for Industrial Economics & Trade announced on July 21 that South Korea’s trade deficit with China totaled approximately US$2 million in the automobile sector during the first five months of this year.

South Korea’s car export to China reached US$2.342 billion in 2011 but has continued to decline since then. The amount almost halved from US$1.795 billion to US$940 million between 2014 and last year and the amount for the first five months of this year stood at US$26.8 million, down 93.7% from a year ago.

During the period, five South Korean automakers exported 1,231 cars to China while South Korea imported Chinese cars, mainly commercial vehicles, worth a total of US$28.54 million. At present, a small truck imported from China is available at 11 million won (US$9,565) or so, which is equivalent to about 70% of the average price of the same type of cars manufactured by South Korean carmakers.

According to the institute, China’s car import, which had continued to increase for 10 years until 2014, fell by 26.3% year on year in 2015 and by 10.9% from a year earlier during the five months of this year. This is mainly because Chinese automakers are enhancing their competitiveness. Their combined market share in China rose from 38% to 41% between 2014 and last year.

An increase in South Korean automakers’ production in China is another reason. For example, the local production volume of the Hyundai Motor Group exceeded one million cars in 2010 and soared to 1.78 million in 2014 and 1.7 million in 2015. From January to May this year, however, Hyundai Motor Company’s and Kia Motors’ exports to China dropped by 96.3% and 93.5% from a year ago, respectively. Renault Samsung Motors exported 35,000 cars to China in 2014 but the amount plummeted to 401 during the five months after the establishment of its local joint venture Dongfeng Renault.