Lowest in Seven Years
The Korea Automobile Manufacturers Association announced on May 31 that South Korea produced 1,040,971 cars in the first quarter of this year and the number decreased by 30,378 from a year ago. It added that the output in Q1 this year is a seven-year low when it comes to its Q1 outputs.
Among the global top 10 automobile manufacturing countries, only the United States, Canada and Korea showed a decline in output in that period and Korea’s rate of decline, 2.8%, exceeded those of the U.S. (2.1%) and Canada (2.5%). Meanwhile, Mexico increased its output by no less than 18.2% and is poised to overtake Korea.
Korea used to be the fifth-largest automobile manufacturing country in the world in 2005 to 2015. However, it was outperformed by India and slid to sixth place last year. This year, the gap between Korea and India is widening. Specifically, India produced 1,240,533 cars in Q1 this year, up 9.7% from a year ago. The gap between them increased from approximately 60,000 to 200,000 units between the first quarters of 2016 and 2017.
The decline in Korea’s car production volume can be attributed to sluggish exports above anything else. In Q1, 2017, Korean automakers’ domestic sales edged up year on year from 368,492 to 374,451 whereas their exports fell from 653,205 to 628,172. “In view of the fact that 62% to 63% of their domestic output is exported, their exports should be increased for their total production to be increased,” the association explained.
According to industry experts, the other factors include deteriorating domestic production conditions such as high labor costs and tense labor-management relations, which have driven Korean automakers to relocate their manufacturing facilities to other countries, and changing external conditions characterize by increasing trade protectionism.