Diesel sales sputter as the price of oil heads south

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Diesel sales sputter as the price of oil heads south

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In August, diesels were 91 percent of BMW 3 Series sales, but by December that figure had slipped to 83 percent.

A similar trend was evident at Volkswagen. Sales of the Golf 2.0 TDI diesel hatchback were 602 units in October and 528 in December.

Industry insiders say that while foreign automakers were able to expand their market share in Korea thanks to diesel models, which use cheaper fuel and get better mileage than cars with gasoline engines, the recent drop in oil prices is changing that equation in the automobile business and related industries.

According to Korea National Oil Corp., the average price of gasoline was 1,851.55 won ($1.71) per liter in August, before falling to 1,591.5 won per liter by late December.

As a result, gasoline-powered cars - foreign and domestic - have been gaining traction with Korean consumers since September.

For Hyundai Motor’s Avante sedan, about 40 percent of units sold in September were diesel models, but the share dropped to 24 percent in December. The trend for midsize and large sedans is similar. In October, 1,178 diesel models of Renault Samsung’s flagship SM5 sedan were sold, but only 967 in December. About 31 percent of Hyundai Grandeurs sold in November were diesel models; last month it was 18 percent.

Sales of diesel models had consistently been above 90 percent for the Audi A4 35 Quattro before dropping to 88 percent last month. Diesel sales in August were 123, but only 88 in December.

“Due to strict environmental regulations, those brands have had a hard time selling diesels in Europe, but they were able to maintain overall global sales figures because diesel models were very popular in Korea,” said an industry spokesman. “Since oil prices keep falling, those automakers are in a situation where they have to change their marketing strategies.”

Outside the automotive industry, gas companies have also been affected by cheaper oil. Many companies with factories in industrial complexes, including Ulsan, South Gyeongsang, have been replacing natural gas with bunker-c oil.

Revenue for the nation’s second-largest gas company, Kyungdong City Gas, in the third quarter last year dropped 4 percent year-on-year, while operating profit fell 34 percent.

The company serves major conglomerates that operate factories in Ulsan such as SK Energy, S-Oil and Hyundai Motor.

Similar situations are seen in other regions. For Youngnam Energy Service, which supplies gas to North Gyeongsang, including Gumi, the demand for industrial gas fell from 373.3 million cubic meters in 2013 to 318.77 million cubic meters last year, a 15 percent decrease.

Korea City Gas Association said the average price of natural gas in September 2012 was about 93 percent of the average price of bunker-c oil, compared to 107 percent today.

“Natural gas lost its competitiveness as the average oil price dropped from about $100 a barrel to the neighborhood of $45,” said an industry spokesman.

sakwon80@joongang.co.kr [BY KIM YOUNG-MIN, LEE SOO-KI ]

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