Domestic Cars Losing Domestic Demand, Risking Losing Loyal Customers

While Domestic Cars Struggle, Imported Cars Continue to Thrive

[Asia Economy Reporters Changhwan Lee, Jehun Yoo] Domestic automakers' domestic sales performance has been sluggish. The performance of foreign-affiliated mid-sized companies such as Korea GM, Renault Samsung Motors, and SsangYong Motor was particularly severe. On the other hand, imported cars are rapidly growing in the domestic market, raising concerns that the position of domestic cars will gradually shrink.

According to the automobile industry on the 5th, Hyundai Motor's domestic sales last month were 73,810 units, an increase of only 2.3% compared to the same month last year. Kia sold 51,011 units, similar to last year. Compared to the increase in overseas market sales due to revenge consumption following the recent COVID-19 situation, domestic sales volume was evaluated as falling short of expectations.

The three foreign-affiliated mid-sized automakers were in a more serious situation. Korea GM, Renault Samsung, and SsangYong's domestic sales in March were 6,149, 5,695, and 4,306 units respectively, down 31.4%, 52.6%, and 37.2% compared to the previous year. On a quarterly basis, the combined sales of the three companies decreased by 23.8% to 43,109 units, marking the lowest level in 23 years since 1998 (31,848 units) right after the foreign exchange crisis.

The sharp decline in sales of foreign-affiliated mid-sized companies is attributed to repeated labor-management conflicts, resulting withdrawal rumors, and the disappearance of new car effects. Among them, SsangYong Motor is at a crossroads for survival for a year since the Indian Mahindra Group declared its withdrawal. There is no news of new model launches this year, and concerns about withdrawal from the Korean market due to management difficulties have overlapped, leading to sluggish sales since the beginning of the year.

The lifeline for foreign-affiliated mid-sized companies corresponds to some models considered as 'young breadwinners.' For Korea GM, as of the first quarter, the sales proportion of Spark and Trailblazer accounted for 59.5% of total sales, up 1.5 percentage points from the previous year. Renault Samsung's QM6 and XM3 sales proportion rose 3.6 percentage points to 87.6%.

This crisis situation is expected to continue for the next one to two years. Korea GM plans to start mass production and sales of a new sports utility vehicle (SUV) in 2023, and Renault Samsung also has no concrete new car plans. This means they have to rely on existing models excluding imported models for the next one to two years. Hyundai and Kia are also facing crises, temporarily halting factory operations recently due to semiconductor parts shortages.

While domestic car companies struggle in their home market, imported car companies are thriving. According to the Korea Imported Automobile Dealers Association (KAIDA), new registrations of imported passenger cars in March surged 34.4% year-on-year to 22,297 units.

By brand, Mercedes-Benz ranked first with 7,597 units. This surpassed the performance of the three foreign-affiliated mid-sized automakers and ranked third in the entire domestic market following Hyundai and Kia. BMW also sold 6,012 units last month, ranking fifth in the domestic market.

An industry official said, "While domestic cars are struggling in the domestic market due to successive adverse factors, imported cars are thriving by targeting consumer preferences," adding, "To avoid losing the domestic market, quick measures such as advancing new car launches and strengthening promotions should be implemented."

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