Autos now Korea's top export to U.S.

SEOUL - Automobiles have raced ahead of semiconductors as South Korea's top export to the key U.S. market and local automakers are confident they can hit targets despite a slowdown in the world's largest economy.

Semiconductor exports played a major role in the nation's recovery from the 1997/98 financial crisis and their export value was double that of cars until this year, Ministry of Commerce data showed.

"As of September 20, auto exports to the United States increased 33.9 percent year-on-year, while semiconductor shipments fell 52.1 percent over the same period," Ahn Chang-yong, an official in the ministry's export division, told Reuters.

Semiconductor exports to the United States amounted to $2.72 billion as of September 20, while auto exports totaled $3.98 billion out of total U.S.-bound exports of $22.28 billion, the ministry said.

Prices of DRAM or dynamic random access memory chips have plunged nearly 90 percent in the past year and now cost more to produce than to sell.

Still Ahn said that in terms of Korea's total exports, semiconductors will continue to outpace autos.

EASY TARGETS

Top-ranked Hyundai Motor said it now expects to surpass its U.S. export target of 320,000 vehicles this year, up more than 10 percent from a year earlier.

"Judging from current levels, it looks like we'll have no problems in beating our earlier U.S. export target," said Hyundai spokesman Park Sang-woo.

Affiliate Kia Motors said it would meet its 2001 U.S. export target of 252,100 units, which is up 57 percent from the previous year, spokeswoman Kim Jin-ho said.

The world's largest automaker, General Motors, has said it would cut its North American vehicle production in the fourth quarter, while rival Ford Motor Co. said third-quarter earnings would miss expectations after the U.S. air attacks.

Analysts said Korea's car exports would continue to grow as more U.S. consumers recognised the improved quality of compact and sub-compact South Korean automobiles, which are less expensive than their Japanese rivals.

"Korean-made cars are almost 20 percent cheaper than Japanese cars sold in the United States," said Suh Sung-moon, an auto analyst at ING Barings.

"And overall quality levels are improving."

Hyundai offers a five-year, 60,000-mile bumper-to-bumper warranty and 10-year, 100,000 mile powertrain coverage for autos sold in the United States, longer than most guarantees offered by American and Japanese rivals. Kia said its coverage is similar.

The government, eager to seize on all positive export trends, said it would invest 1.25 trillion won ($959.3 million) over the next 10 years to develop prototype automobile models.

One of the ambitious goals highlighted in the government's investment plan is to develop a car that can travel 100 km on two litres of fuel, the Commerce Ministry said.

FOREIGN INROADS

Foreign automakers are making inroads into South Korea's insular auto market, where GM sold less than 400 cars last year while Hyundai sold more than 600,000.

France's Renault S launched a joint venture last year to revive debt-laden Samsung Motors, gaining a foothold in Asia, the world's fastest-growing market for automobiles.

Last month, GM signed a memorandum of understanding to acquire portions of bankrupt Daewoo Motor with a final contract expected by the end of the year.

Analyst Suh said intensified competition with foreign automakers in the Korean market will improve the quality and product mixes of Korean automobiles.

"This will lead to greater exports," he said

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