Exports Drive Korean Car Sales

SEOUL July 1, 2003; Jean Yoon wrting for Reuters reported that South Korean auto makers, led by Hyundai Motor Co, reported on Tuesday that sales of cars motored ahead in the first half of the year, driven by higher exports to the key U.S. market, despite a drop in domestic sales.

Racy new models, improved quality and high incentives have helped make South Korea the world's fifth-largest automobile producer behind the United States, Japan, Germany and France.

The country's five car makers -- Hyundai Motor, Kia Motors Corp, GM Daewoo Automotive & Technology Co, Renault Samsung Motors Inc and Ssangyong Motor Co -- sold a combined 1.88 million vehicles in the first half, up 11 percent from 1.69 million a year earlier, according to data they issued separately.

Hyundai Motor, South Korea's largest auto maker, reported sales of 12 percent more cars to 970,642 in the first half. Exports rose 30 percent to 627,728 from a year earlier, while domestic sales fell 11 percent to 342,914.

"Domestic demand is unlikely to recover any time soon, which is a big worry for car makers," said Cho Soo-hong, an analyst at Dongbu Securities. "We will probably see them focusing on exports for the time being."

Hyundai, 10 percent owned by U.S.-German auto maker DaimlerChrysler AG, has jumped into the relentless price war in the U.S. market, with cash rebates and extended warranties for many models.

It has been reaping the benefit of heavy investment in upgrading and improving the reliability of its cars.

Shares in Hyundai Motor gained 3.16 percent to close at 32,600 won on Tuesday, while the broader market ended up 0.72 percent. Kia added 1.6 percent but Ssangyong fell 0.8 percent.

FLAGGING DEMAND

South Korea's economy, the fourth-largest in Asia, contracted in the first quarter for the first time in more than two years as domestic spending crumbled amid worries over North Korea's nuclear ambitions and a global economic slowdown.

Analysts warned the economy may have contracted again in the second quarter, signaling a first recession in five years.

Hyundai said its June sales had jumped a whopping 46 percent to 150,825 because of labor unrest by its 39,000 unionized workers in the same period last year. The workers also held partial strikes late last month after wage talks broke down.

Meanwhile, Hyundai's affiliate, Kia Motors Corp, said its first-half sales rose to 541,590 units, up 14.6 percent from 472,758 a year earlier.

Third-ranked GM Daewoo, which was launched after General Motors Corp took over some assets of ailing Daewoo Motor Co, said sales of cars rose 3.2 percent to 224,589 from 217,649 a year earlier.

Renault Samsung Motors Inc, one of the country's smallest auto makers, said it sold 59,321 vehicles, up 10.5 percent from 53,699 a year earlier. Renault Samsung started selling its second model, the small-to-mid-sized SM3, in September last year. Sales at SUV maker Ssangyong Motor, which sells most of its vehicles in South Korea, fell 1.7 percent to 80,324 units from 81,741.