Domestic Car Market Performs Well Despite COVID-19... What About Next Year?

Domestic Sales Expected to Reach Record High of 1.91 Million Units This Year... Partially Offsetting Export Decline

[Image source=Yonhap News]

[Asia Economy Reporter Kim Ji-hee] This year, South Korea's domestic automobile industry was evaluated to have performed relatively well compared to competing countries despite the challenges posed by the COVID-19 pandemic. Production minimized the impact compared to competitors, boosting the country's ranking to 5th place, while domestic sales showed a positive trend as the only major country to record growth.

According to the Korea Automobile Manufacturers Association on the 26th, domestic automobile sales from January to October this year increased by 6.2% compared to the previous year, marking the only growth among major countries worldwide. Annual domestic sales, including imported cars, are expected to reach a record high of 1.91 million units. During the same period, domestic sales in the United States, China, and Germany decreased by 17.3%, 4.7%, and 22.9%, respectively.

During the same period, the country's production ranking rose from 7th to 5th place. This is attributed to immediate quarantine measures and support to resolve parts supply difficulties, which prevented prolonged factory shutdowns unlike other countries, leading to early stabilization of production.

Exports are expected to decline by 20.7% to 1.91 million units annually compared to this year. However, minimizing production disruptions and the introduction of strategic models such as sport utility vehicles (SUVs) and eco-friendly cars expanded market share in key markets, which is seen as positive. As of January to November, the market share of domestic cars in the United States increased to 8.6% (from 7.8% last year), and the European market share from January to October rose to 7.2% (from 6.8% last year). Additionally, the increased domestic sales partially offset the sharp decline in exports.

Production facilities and workforce to sustain the industrial ecosystem were maintained at previous levels. Employment in the automobile manufacturing sector was 374,000 in October, similar to 378,000 in January this year. The performance of the parts industry, which faced severe difficulties in the first half of the year, also showed signs of recovery in the third quarter. Sales of 85 listed parts companies shifted from a 16% decrease in the first half to a 3.1% increase in the third quarter.

On the other hand, domestic sales are expected to decline next year compared to this year. This is due to a reduction in government support measures such as old car replacement subsidies and individual consumption tax cuts, as well as a relatively weakened effect of new car launches next year following a flood of volume model releases this year. The association forecasts domestic automobile sales at 1.82 million units next year.

Exports are expected to increase by 22.9% to 2.34 million units next year due to the base effect from this year's slump. However, exports are unlikely to recover to the 2019 level of 2.4 million units next year.

In particular, the association explained that while the global automobile market is expected to see a surge in demand next year as the COVID-19 situation stabilizes, competition will also intensify. Overseas competitors who experienced severe supply disruptions this year are normalizing production, and China is actively expanding overseas. As a result, South Korea's production ranking, which rose two places to 5th this year, may fall back to around 6th or 7th place.

This content was produced with the assistance of AI translation services.