Debt Rises, Prices Increase, Buyers Have Bought... Domestic and Imported Cars Both Expected to Decline Next Year

Next year, the domestic new car sales market is expected to shrink. The domestic finished car market, which had declined during the COVID-19 period, showed signs of recovery this year as production disruptions were overcome. However, demand weakened in the second half of the year, and it is expected that the decline in demand will continue steadily next year as well.

According to the industry evaluation and next year’s outlook report released by the Korea Automobile Mobility Industry Association on the 4th, domestic market sales volume this year is estimated at 1.74 million units. This is a 3.3% increase from 1.684 million units last year. The forecast for next year is 1.71 million units, which is expected to decrease by about 1.7% compared to this year. Domestic cars are expected to decrease by 1.4% to 1.42 million units, and imported cars by 3.3% to about 290,000 units.

Hyundai Certified Used Car Yangsan Center
[Photo by Hyundai Motor Group]

Imported car sales are expected to be around 300,000 units this year. It is forecasted to decline for the first time since the imported car market was fully established, and recovery to about 290,000 units next year is expected to be difficult.

The domestic finished car market, which showed double-digit growth until the first half of this year, cooled rapidly in the second half. During the COVID-19 period, new car production was delayed due to parts supply disruptions, which caused a surge in waiting demand. The high demand for new cars was due to this accumulated waiting demand, but as vehicle supply gradually normalized, much of the waiting demand was resolved.

Household debt has increased and installment interest rates have risen, increasing the burden of purchasing new cars. Household disposable income has decreased due to falling real estate prices and increased mortgage interest burdens. New car prices have steadily risen due to increases in raw material prices and labor costs. Although car prices have become more expensive, consumers’ wallets have become thinner, making it a less favorable environment for purchasing cars.

Subsidies for electric vehicle buyers will also decrease by 1 million KRW next year. Consumers considering switching to electric vehicles tend to postpone purchases, waiting until issues such as charging infrastructure and safety are resolved.

Cars are waiting to be shipped at Pyeongtaek Port, viewed from the air. [Aerial shooting cooperation=Seoul Metropolitan Police Agency Aviation Unit, Pilots: Lieutenant Shin Seung-ho - Lieutenant Park Ji-hwan, Crew: Lieutenant Park Sang-jin] Photo by Kang Jin-hyung aymsdream@

However, there are also factors that could increase demand contrary to these decreasing factors. The association expects that the economy will gradually recover and interest rates will fall, potentially leading to a recovery in private consumption in the second half of next year. There is also a possibility that new car demand will increase with the launch of various new eco-friendly models such as electric and hybrid vehicles.

Exports showed a clear recovery this year centered on the U.S. and Europe, and the association expects a similar trend to continue next year. The forecast for this year is 2.7 million units, an increase of more than 17% compared to last year. Exports are expected to increase by 1.9% next year to 2.75 million units. Export value is expected to reach a record high of 68.8 billion USD this year and is projected to reach 71.5 billion USD next year.

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