Growth of import sales hurts domestic automakers

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Growth of import sales hurts domestic automakers


Korean automakers are going through a difficult time both at home and abroad.

While their images have been dented with recalls and by militant labor unions, on home turf, they have been squeezed by imports, which have aggressively expanded.

“I think the Korean auto industry at this moment is at risk, and we have to set the direction carefully,” said Kim Pil-soo, professor of automotive engineering at Daelim University College.

On Wednesday, Hyundai Motor, Korea’s largest automaker, announced a recall of some 883,000 YF Sonatas in the United States and Puerto Rico due to problems with their transmission-shift cables. According to information on the U.S. National Highway Traffic Safety Administration’s website, the transmission shift cable could potentially separate from the shift-lever pin, which may increase the crash risk.

This was Hyundai’s largest recall for a single model. Hyundai’s image was already compromised after it admitted in 2012 that it inflated the fuel mileage on its models. The recall is just the latest blow for the automaker, which has been working steadily to recover its reputation following good scores in consumer market surveys.

Industry observers said that the global competitiveness of local automakers came from its competitiveness in the domestic market. However, at home they face a road block, mainly due to a consistent tug-of-war between management and labor unions.

A few have struggled this year with negotiations regarding an increase of base wages, which becomes the basis for calculating overtime pay and retirement allowances. While Ssangyong Motor and GM Korea managed to come to an agreement with their unions, Hyundai, Kia and Renault Samsung have yet to finalize their bargains.

In addition, the domestic market situation has become fierce with growing imports sales. According to data from the Korea Customs Service, Korea’s trade surplus in the passenger vehicle sector in the second quarter decreased 2.8 percent year-on-year to $9.7 billion as the growth of imports outpaced that of exports.

The customs agency said Korea’s exports of passenger vehicles during this April to June period reached $11.63 billion, up 3.8 percent from the same period last year, but this was shadowed by imports, up 58.4 percent year-on-year to $1.93 billion.

The average price of Korean-produced cars shipped overseas in the second quarter gained 3.1 percent to $14,656, but the strong won clouded that impact. “Korean automakers’ overseas sales do increase, but they make small profits because they aren’t exporting high value-added cars,” Kim said. “Japan has the hybrid, Europeans have diesel, but what do we have?”

Cho Chul, chief of the machine and electronics industries at the Korea Institute for Industrial Economics and Trade (KIET), said that the Korean auto industry has lost its power as a growth engine because production capacity is unlikely to grow. “Regardless of the competitiveness of imports, the production of cars in Korea is not increasing and, in fact, it could decrease as GM Korea is affected by the Chevrolet-brand pull off from Europe,” he said.

But some experts are saying that this could be an opportunity for the local auto industry amid a shift to technology development.

“The paradigm of the auto industry is changing, as it is no longer centered on automakers,” said Lee Nam-seok, a business administration professor at Chung-Ang University. “It is true that the Korean industry’s pure status in the world has fallen compared what it was ... but this doesn’t mean our auto industry has lost its chance to step up.”


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