Growth Pace Crisis
The pace of the growth of Korean carmakers is falling behind those of global leaders, mainly due to currency exchange fluctuations, sluggish performances in major markets, and the lack of better marketing and quality enhancement strategies.
Credit rating agency Moody’s recently predicted that the global car sales would increase by 3.0 percent from a year earlier to 86.8 million units this year. For reference, the sales growth rate had been 3.8 percent in 2013. In contrast, Korean automakers sold 3,301,692 cars during the first nine months of this year to record a year-on-year growth of merely 1.6 percent. They had even posted a negative growth of 3.4 percent in 2013.
In the second quarter, Hyundai Motor Company’s operating profits dropped by 13.3 percent from the preceding year to 2.0872 trillion won (US$1.9793 billion). Although the sales volume increased 4.4 percent compared to the same period of last year, the 5.1 percent drop in exchange rate dragged down the sales and profits alike. The combined business profits of Hyundai Motor Company, Kia Motors, and Hyundai Mobis, all belonging to the same Hyundai Motor Group, are estimated at around 3 trillion won (US$2.8 billion) as well, 11.9 percent down from the previous year.
In the meantime, Hyundai Motor Company’s and Kia Motors’ combined domestic market share fell to 67.3 percent in September, the lowest since December last year, despite the debut of new volume models such as the LF Sonata. Meanwhile, car importers increased their sales by 34 percent year-on-year to be about to break the 15 percent market share mark in Korea.
Korean automakers are struggling in the U.S. market, too. In August 2014, the market showed a sales growth of 17.0 percent from the previous year, but those of Hyundai and Kia were limited to 8.2 percent and 4.0 percent each whereas Toyota (22.8 percent), Honda (26.7 percent), and BMW (35.4 percent) led the rapid growth. During the same month, Hyundai and Kia posted a 10.5 percent year-on-year growth in the Chinese market to barely catch up with the overall market growth rate of 11.0 percent.
“The Korean car industry is the fifth-largest in the world in manufacturing volume, but no Korean vehicle has ever topped the global number one export item list,” said Moon Byung-ki, research analyst at the Institute for International Trade of the Korea International Trade Association. He continued, “Korean automakers now need to shift their focus from price competition to innovation for higher technological competitiveness and better quality.”