South Korean vehicle production fell 6.1% year-on-year (y/y) in July, according to data from the Ministry of Trade, Industry, and Energy. The five South Korean automakers produced a combined total of 334,139 units in the month. Hyundai's total output was up 5.1% y/y to 152,556 vehicles during the month, while stablemate Kia registered a loss of 4.8%y/y 123,893 units. The decline was sharper at GM Korea and Renault Samsung with 39.8% y/y and 13.4% y/y respectively. SsangYong registered a surge in production volumes at 11,607 units (up 20.9% y/y). Vehicle exports from South Korea also slipped during the month by 7.3% y/y, with the five South Korean automakers exporting a combined total of 223,482 units, marking the sixth month in a row of declining exports. For the first seven months of 2013, production fell by 4.4% y/y to 2,618,023 units, while exports fell 6.6% y/y to 1,812,796 units.
Significance: Exacerbated by the contraction of the European economy and a strengthening local currency, South Korean automakers are facing challenges in both domestic and export markets. Added to that were fewer working days in July due to one-week summer vacations as well as the impact of the contentious wage negotiations season with intermittent production disruptions at Hyundai, General Motors (GM) Korea, and Renault Samsung. Although SsangYong, GM Korea, and Renault Samsung have managed to strike a deal with their unions, Hyundai’s union is in no mood to relent, and is planning to strike next week. Exports also suffered on account of reduced domestic production, rising production in overseas plants and uncertainties over the global economy resulting in reduced demand from European and emerging markets as well. In light of tough market conditions and slow export demand, IHS Automotive expects South Korean light-vehicle production this year to almost remain flat, rising by a mere 0.1% y/y to 4.52 million units.
