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Automobile industry

South Korea's Auto Sales Slump Amid Tax Break Expiration and Regulatory Hikes

Strategic Insights

— 2 min read

South Korea's auto sales market has experienced a downturn in recent months due to the expiration of a special tax break and limited demand at the beginning of the year. The government's decision to cut an excise tax on cars by 1 to 2 percent in March 2004 to stimulate consumer spending has come to an end, resulting in a last-minute buying spree in December 2005. With the tax benefits now expired, industry sources report that the market is experiencing a sales slump. Top automaker Hyundai Motors Co. recorded a 77 percent increase in sales for the month, but its Tuscon SUV model suffered a 20 percent decline due to a price hike triggered by new regulations requiring environmental-friendly engines. Meanwhile, Kia Motor Co. saw a 20 percent decline in sales, while GM Daewoo Auto & Technology Co. managed to retain its sales level from November 2005 through aggressive discounts.

Key Takeaways:

  • Hyundai Motors Co.'s sales increased by 77 percent for the month, but the Tuscon SUV model saw a 20 percent decline due to a near-2 million won price hike.
  • Kia Motor Co. experienced a 20 percent decline in sales for the Jan. 1-20 period, with the mid-sized sedan Lotze and SUV Sportage also seeing declines.
  • GM Daewoo Auto & Technology Co. managed to retain its sales level from November 2005 through aggressive discounts, including a 2 million won cut for the Statesman luxury sedans.
  • The expiration of a special tax break on cars has led to a last-minute buying spree, but now the market is experiencing a sales slump.
  • The government's decision to cut an excise tax on cars in March 2004 has expired, and industry sources are expecting sales to recover starting in March.

Statistics:

  • Hyundai Motors Co. recorded sales of 26,486 cars from January 1 to January 20, amounting to 77 percent of the figure for the previous month.
  • Sales of Hyundai's Tuscon SUV model fell 20 percent annually to 1,150 units, due to a near-2 million won price hike.
  • Kia Motor Co.'s sales declined by 20 percent for the Jan. 1-20 period, with the mid-sized sedan Lotze selling 2,554 units.
  • GM Daewoo Auto & Technology Co.'s sales stood at 3,590 units, retaining its level from November 2005.
  • The government cut an excise tax on cars by 1 to 2 percent in March 2004 to stimulate consumer spending.

Sources:

  • Asia Pulse, "South Korea's Domestic Auto Sales Slump Amid Tax Break Expiration" (Jan 24, 2006)
  • Yonhap, "Auto Sales Slump in S. Korea Amid Tax Break Expiration" (Jan 24, 2006)

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