SEOUL -- South Korean automakers reported a 12.5 percent rise in January sales, led by higher exports and local demand for premium models at the country's top car firm, Hyundai Motor Co., industry data showed on Wednesday.

Analysts said sales at South Korean carmakers should continue to benefit from a recovery in local consumer spending, but could be hit by uncertainties over domestic tax changes, while exports face risks from a strengthening won currency.

"The local car market has maintained a recovery mode after hitting a bottom last May, led by better conditions for domestic demand," said Kang Sang-min, an auto analyst at TongYang Investment Bank.

"But recent risks related to tax could force to change positive views on domestic demand this year."

South Korea may cut tax refunds for millions of wage earners from next year to secure extra revenue to finance increasing welfare spending, the finance ministry said on Tuesday.

In addition, the government lifted temporary tax benefits on cars in January.

The excise tax rate on passenger sedans with an engine size greater than 2 liters was returned to its original level of 10 percent from 8 percent. In the case of vehicles with smaller engines, the excise tax was returned to 5 percent from 4 percent.

The tax benefits were introduced in March 2004 as way of stimulating a depressed local car market.

Combined January automobile sales at the South Korea's five manufacturers rose 12.5 percent from a year ago to 446,795 units.

Exports climbed 15.1 percent to 363,898 vehicles, while domestic sales rose 2.4 percent to 82,897 units.

SO FAR SO GOOD

Hyundai sold 205,755 vehicles in January, up 5.4 percent from a year ago.

The firm, whose local market share hit a 10-year high of 53.7 percent last month, said domestic sales in January rose nearly 15 percent to 45,022 units, led by sales of its premium TG Grandeur sedan.

Hyundai, which aims to become one of the world's top six auto makers by 2010 along with affiliate Kia Motors Corp., sold 160,733 units abroad, up 3 percent from a year ago. The figure includes sales at overseas plants.

Sales at Hyundai's overseas plants rose about 40 percent in January from a year earlier as the firm moves to beef up production abroad to side-step the effect of the won, which has risen 5.3 percent against the U.S. dollar this year.

Kia, the country's number-two car maker, sold 104,924 vehicles in January, down 3.9 percent from a year ago, with a 3.0 percent drop in exports and a 7.8 percent decline at home.

But third-ranked GM Daewoo Automotive and Technology Co. reported a nearly 60 percent increase in January sales to 117,420 units as its exports surged more than 70 percent.

Renault Samsung Motors Inc., the local unit of French Renault SA, said its sales rose 12.4 percent in January to 9,224 units. It offers only three passenger car models that are targeted mostly at domestic consumers.

Ssangyong Motor Co., a South Korean sport utility vehicle maker and owned by China's Shanghai Automotive Industry Corp., posted a 12.6 percent drop in January sales, but its exports rose 12.3 percent.

Shares in Hyundai's shares closed 2.41 percent down at 85,100 won, while Kia fell 2.22 percent to 22,000 won, against a wider market's 1.70 percent fall.