SEOUL -- South Korean car exports are expected to hit a record high in 2005, helped by better demand due to improving quality and the launch of new models, an industry association said on Thursday.
But local sales were expected to remain stagnant due to tepid domestic demand, according to a statement from the Korea Automobile Manufacturers' Association.
Overall, automobile output is expected to grow by 6.6 percent to 3.7 million vehicles thanks to bullish exports, the report said.
The latest forecast was higher than the association's previous projection of 3.55 million units announced late last year, reflecting stronger-than-expected exports in the first half of 2005.
"Despite worries over the stronger won, auto exports shot up 18.3 percent to 1.3 million units in the first half from a year earlier, helped by aggressive marketing and the introduction of new models, as well as increased quality and brand image," the association said.
For the whole of 2005, exports of Korean cars were forecast at 2.6 million units for this year, up 9.3 percent from 2004 and the a record for the industry.
But the start of volume production at Hyundai Motor's first U.S. plant in Alabama might cap the increase in exports in the latter part of this year, it added.
The sales outlook for the South Korean auto industry, which accounts for a tenth of South Korea's exports, has been further brightened by a fall in the won currency and as a flood of new models helped rekindle demand.
But domestic sales are projected at 1.1 million units in 2005, up a meagre 0.6 percent on the year, hit by slower-than-expected growth in the domestic economy, soaring oil prices and high youth unemployment.
"The domestic market in the second half is expected to avoid the negative growth posted in the first half because of a mild recovery in private spending and investment, but high oil prices and unemployment would block a significant turnaround," the association noted.
Local car sales reached 533,000 vehicles in the six months to June, marking the lowest half-year total since the 1997-98 Asian financial crisis.
The forecast came shortly after Hyundai Motor Co., South Korea's top auto maker, said it aimed to sell 320,000 vehicles on its home market in the second half, up 15 percent from a year ago, amid signs of a recovery in consumption.
On Tuesday, the central bank cut its 2005 economic growth forecast to 3.8 percent from 4.0 percent, but it raised its forecast for second-half growth and for private consumption.