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2009 Sales Projection Weak for South Korean Automobile Industry
Dec 18, 2008

In 2009, under tight finance market, consumer footfall to showrooms may not be enough to keep the South Korean automobile sales up.

Korea Automobile Manufacturers Association (KAMA) presented a negative outlook for the automobile sales for 2009, as reported by bloomberg. It feared that, 2009 sales could be the lowest ever for the domestic automobile sales after 2004.

KAMA has projected that domestic automobile sales will reduce by more than 10% to 1.1 Million Units in 2009. It has revealed that tight credit market and economic slump could cap the automobile demand in the country. Financial crisis in the international market is likely to impact South Korea’s real economy growth negatively next year. Thus, a contraction in domestic automobile sales is expected due to economic slowdown.

Automobile manufacturers have started to shut down their plants temporarily in order to clear the piled up inventories both at dealers’ end and warehouses. Apart from production cut, they have also trimmed jobs due to low sales in the last quarter of 2008. For instance, GM Daewoo indicated that it can shut production at some of its plants by the end of first quarter of 2009 if automobiles sales do not improve. Most of the automobile manufacturers are also offering discounts on certain brands/models at higher rate to boost up their sales and recover their production cost.

In order to offset the effect of global financial turmoil, the government has provided financial support, recovered consumer confidence and cut the lending rates to boost up the spending in the domestic market. However, automobile industry believes that these measures are not enough to support the industry, thus it also urges to cut tax on fuel, fund supply for auto loans industry and financial bailouts for manufacturers.

According to a research analyst at RNCOS, “South Korea is likely to witness a fall in automobile sales in 2009. Tightened finance market is likely to keep buyers away from the automobile showrooms. Automobile price drop due to piling of stocks at dealers’ end may lead to postponement of fresh purchase as people may expect further price decline in near future.”

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