Tax cut keep cars zooming out of dealerships

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Tax cut keep cars zooming out of dealerships

Domestic carmakers sold the most cars ever in a first quarter thanks to extended tax benefits for individual carbuyers.

The car companies sold 368,492 units in the first three months of the year, beating a previous first quarter high of 362,856 in 2011, according to data from seven producers on Friday.

The domestic carmakers benefitted from the government decision to extend cuts in the individual consumption tax on car purchase from 5 percent to 3.5 percent through June. The tax cut, which started last August, was originally intended to expire at the end of last year.

The government extended it as a slump in the Korean economy and its export markets hit the nation’s manufacturers including automakers. When the tax cut is applied, domestic automobiles get cheaper by between 200,000 ($173) and 2 million won depending on the model.

With the exception of Renault Samsung Motors and Zyle Daewoo Bus, the remaining five domestic carmakers - Hyundai Motor, Kia Motors, GM Korea, Ssangyong Motors and Tata Daewoo - had increases in first-quarter sales in the quarter ending March. On average, accumulated vehicle sales advanced 6.9 percent year-on-year.

“We have an upbeat outlook on domestic sales through the second quarter, given the effect of the individual consumption tax cut and new vehicle models being released,” said a car industry insider.

The aggressive launch of new models in the January-March period added momentum to the sales.

The EQ900, the first car to be released under Hyundai Motor’s Genesis luxury brand, recorded sales of 8,210 units after its release last December. In March alone, 3,570 units were sold, a rally in sales considering its steep sticker price.

Hyundai Motor’s eco-friendly Ioniq hybrid released in January topped the local hybrid car market selling 3,054 units in the first quarter.

Kia Motors’ all-new K7 sedan, also launched in January, recorded 6,256 unit sales last month.

Renault Samsung Motors also saw healthy sales with its SM6 midsize sedan released last month. A total of 6,751 units of the SM6 were sold in March, bringing overall sales to surpass 10,000 units in March, a 70.5 percent increase year on year.

GM Korea’s Spark, under the Chevrolet brand, was popular and sold 9,175 units last month, an 87.7 percent year on year increase. That was a monthly record since the model’s release last August.

But domestic automakers’ exports continued to struggle.

While the nation’s biggest automaker Hyundai Motor saw a rise of 7.2 percent year on year in March for domestic sales, it saw exports fall 5.1 percent.

The situation is similar for all other local manufacturers. Kia Motors dropped 4.8 percent, Renault Samsung Motors plunged 8.7 percent and Ssangyong Motors tumbled 23.5 percent last month compared to a year before.

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