SEOUL - The rate of decline in the South Korean market in 1999 is expected to slow from 1998, when the industry posted its first drop in 18 years.
Analysts and think tanks are predicting the Korean market will recover somewhat in 1999.
'I'm not too optimistic,' said James Yoon, auto industry analyst for KEB Smith Barney Securities. Yoon sees a 14 percent improvement in domestic sales at best.
Sales plummet to 779,905
According to the Korea Automobile Manufacturers Associa-tion, 1998 production was down 30.6 percent to 1,954,494 units. The protracted Asian recession and rising unemployment were blamed for severely eroding Korean consumer confidence and dragging down domestic sales 48.5 percent to 779,905 units. That marks the first year since 1990 that domestic sales were less than a million.
'People who have money will spend it. What we're seeing is a polarization of the market,'*Yoon said. 'There's considerable corporate demand. The cash is there, but fears about the economy have to subside before people start spending again.'
A stronger won also hurt Korean automakers. The won gained two-thirds against the U.S. dollar last year, hindering exports, which nudged up only 3.4 percent to 1,362,164 units.
Worse, the value of those shipments actually fell 11.3 percent to $8.66 billion, partly the result of a sharp increase in the number of minicars that were exported by Daewoo and Hyundai.
Daewoo posted a 37.6 percent improvement in exports last year, a performance that lifted the rest of the industry. 'They're going full thrust,' observed Yoon.
Exports look favorable
Yoon said exports could grow by as much as 7 percent this year. Specifically, analysts are forecasting another strong year for Daewoo, as shipments to the United States gather steam.
'Smaller cars like the Hyundai Atos and Daewoo Matiz will help drive (Korea's) export growth this year,' Yoon added.
A sharp increase in the gasoline tax also sparked a minicar buying boom that has dramatically reshaped the Korean market. Daewoo's Matiz and Tico grabbed the lion's share of the minicar market, outselling the Hyundai Atos 2-to-1. Atos' boxy styling has gotten a cool reception from domestic consumers, prompting Hyundai to rush ahead with a major facelift that is due this year.
Hyundai places 4 in Top 10
Despite its weak performance in the segment, Hyundai accounted for four of the top 10 domestic models. The Sonata eclipsed the Atos as Hyundai's No. 1 seller, with taxi fleet customers accounting for nearly a quarter of Sonata sales. Samsung put in a strong showing with its mid-sized SM5 series, but in-house customers are believed to account for a significant portion of its first-year sales.
Budget-conscious consumers sought refuge from high gasoline taxes by buying diesel-powered minivans and sport-utilities.
The Kia Carnival proved to be the surprise of the year with 35,427 units sold, making the minivan Kia's sales leader. Hyundai's Starex van racked up 31,426 sales.
Ssangyong was the king of the hill among sport-utilities with its Korando and Musso models. Their combined sales reached 18,288 units. Hyundai's Galloper trailed with 3,955 units, and the Kia Sportage was barely in the picture with sales of just 4,095 units.
Importers were hit with their worst year ever, as sales plunged 75 percent. Importers sold 8,136 units in 1997 and only 2,075 last year, according to the Korea Automobile Importers and Dealers Association.
What may be worse is the decimation of dealers, particularly in the provinces, as poor prospects for a sales recovery have forced many to give up.
On the plus side, the sluggish market has forced most gray-market importers out of the business.