[NEWS IN FOCUS] Car buyers still hitting the brakesDespite a steady stream of new government programs intended to ease the economic fallout from the coronavirus pandemic, recent measures aimed at boosting vehicle sales seem to be largely falling flat.
The government last month reintroduced a cut to the individual consumption tax for new vehicles purchased from March through June. The normal rate of 5 percent will be lowered to 1.5 percent for those buyers, with a maximum tax break of 1 million won ($840). By maxing out other tax cuts, buyers can get a new car for up to 1.43 million won less than the normal after-tax price.
But with auto manufacturing supply chains snarled, both production and sales are still lagging well behind normal numbers, according to government and industry group statistics.
Aggregate sales in February for Hyundai Motor, Kia Motors, GM Korea, Renault Samsung Motors and SsangYong Motor dropped 11 percent to 505,212 units in February, from 567,756 units during the same period a year earlier.
And aggregate production by Korea’s five domestic automakers fell to 189,235 units in February, according to the Korea Automobile Manufacturers Association, down 26.4 percent from 257,276 units in February 2019.
That figure represented a near halving of the 336,032 units made in February 2017 and the lowest figure for any February since 1999, at the depth of the Asian financial crisis.
“The tax break could have helped demand for new cars to rise in this difficult time,” said Kim Pil-soo, an automotive engineering professor at Daelim University. “But production delays and uncontrollable numbers of preorders are expected to keep most customers from enjoying the benefit. If this continues, more and more orders will be canceled, and sales will take another hit.”
So far, the program doesn’t appear to be having much of an impact on sales. Many popular models face significant production delays, and customers who placed orders for those models are unlikely to receive the cars in time to use the extended tax break.
Hyundai Motor said most of its customers are unlikely to receive the GV80 and Palisade SUVs before the end of June, with many orders for the popular vehicles not expected to be delivered until next year.
The GV80, the first SUV model from Hyundai Motor’s luxury brand Genesis, logged more than 20,000 orders since its launch earlier this year. But only 1,523 units of the GV80 had been delivered to customers by the end of February.
Hyundai Motor was planning to manufacture 2,000 units each in January and February and start rolling out around 4,000 units per month in March. But the coronavirus pandemic and following supply crunch forced the factory in Ulsan to halt its assembly lines for several days last month.
The problem remains for cars that were launched last year, as well. Hyundai Motor’s Palisade SUV and Kia Motors’ Mohave the Master SUV face delivery delays of more than four months at this point, which would be too late for customers to enjoy the extended tax break.
That said, the same situation could work favorably for other automakers, whose new releases are expected to start delivery in a month.
Kim added that the tax cut is unlikely to provide much of a boost for carmakers, as the amount saved is unlikely to move the needle much for customers weighing whether to buy a new car.
“People don’t decide they should buy new cars because there’s a tiny tax discount,” Kim said. “The economy must improve before anything else, and there’s only so much that the government can do to stimulate car sales.”
BY KO JUN-TAE [firstname.lastname@example.org]