Car Exports and Production Decline... "Individual Consumption Tax Cut Should Be Extended to Boost Domestic Demand"

Automobile Exports to the US Plunge 32% Year-on-Year from January to May
Domestic Sales Up 3.0%... "Policy Support Must Continue"

This year, as automobile exports and production have experienced negative growth, domestic sales have shown a contrasting trend. Industry insiders are calling for an extension of policy support measures, which are set to expire this month, in order to sustain the recovery in the domestic market.

Cars waiting for export at Pyeongtaek Port, Gyeonggi. Photo by Yonhap News

According to the Korea Automobile & Mobility Association's provisional May report on the automotive industry, domestic automobile sales from January to May 2025 reached 680,786 units, a 3.0% increase compared to the same period last year (660,651 units). This has raised expectations that the domestic market is rebounding, in contrast to last year, when annual sales fell by 6.5% due to weakened consumer sentiment and a temporary stagnation in electric vehicle demand, known as the "EV chasm."

In contrast, automobile exports during the same period fell by 3.8% to 1,168,338 units. Production also declined by 1.9% to 1,757,871 units. Notably, automobile exports to the United States last month plunged 32.0% year-on-year to $1.84 billion, while exports of auto parts to the United States dropped by 8.3% to $430 million. This is analyzed as being due to Hyundai and Kia increasing local production in response to tariff policies implemented by the Donald Trump administration.

In the domestic market, sales of both domestic and imported vehicles increased, with imported vehicles showing particularly strong growth. From January to May 2025, sales of domestic vehicles reached 563,051 units, while imported vehicle sales totaled 117,735 units. These figures represent increases of 1.0% and 14.4%, respectively, compared to the same period last year. The significant number of new model launches by import brands this year is seen as a key factor behind this growth.

According to the Korea Automobile Importers & Distributors Association, the top three best-selling imported models this year?Mercedes-Benz E-Class (10,856 units), BMW 5 Series (9,703 units), and Tesla Model Y (9,270 units)?are all newly introduced models.

Industry stakeholders argue that policy support, such as extending the reduction of the individual consumption tax, should continue to boost domestic demand. Since addressing trade issues such as U.S. tariffs will take time, they emphasize that the government should focus on measures that can immediately stimulate domestic demand. The flexible individual consumption tax rate applied to new car purchases (reduced from 5% to 3.5%) will expire on June 30, and the 70% reduction in the individual consumption tax for replacing old vehicles will also end this month.

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