SEOUL - South Korean carmakers, led by Hyundai Motor, posted a 7 percent rise in sales in January on surging exports, but analysts warned that tough U.S. competition and sluggish domestic sales could mar prospects for the full year.
South Korea has become the world's fifth-largest producer of automobiles, behind the United States, Japan, Germany and France, thanks to new models, improved quality and extended warranties.
But the nation's automakers now face fresh challenges, with heavyweight General Motors leading a relentless price war in the key U.S. market and a strong Korean currency making their products more expensive.
Japanese rivals face a similar fate with car demand expected to be sluggish this year despite a rise in sales in January, helped by the launch of new models.
South Korean carmakers -- Hyundai, Kia Motors Corp., GM Daewoo, Renault Samsung and Ssangyoung Motor -- sold a combined 298,000 vehicles in January, up 7 percent from 278,800 in the year-ago period, according to Reuters calculations.
Hyundai, South Korea's largest automaker, said total sales rose almost 3 percent in January from a year earlier to 156,222 units. The rise was driven by brisk exports of Santa Fe SUVs and EF Sonata sedans.
"The discount game involving the Big 3 U.S. automakers is gaining momentum," said Lee Young-min, an auto analyst at Meritz Securities.
Analysts say Detroit's Big 3 automakers hold more financial ammunition in a price war, undermining Korean carmakers' cost advantage and competitive warranties.
Hyundai, 10 percent-owned by DaimlerChrysler AG, said last week it planned to cut interest rates on financing deals in the key U.S. market for EF Sonata sedans and Santa Fe SUVs to counter top carmakers.