COVID-19 stops factories, sends domestic car sales to lowest in 11 yrs in Feb

2020.03.03 12:18:25 | 2020.03.03 12:41:02

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Monthly domestic car sales by South Korean automakers dipped to the lowest in 11 years in February, with manufacturing disruptions from epidemic outbreak expected to damage sales by more than $3 billion for Hyundai Motor Group in the first quarter and upset the entire automotive supply chain.

Hyundai Motor Co., Kia Motors Corp., Renault Samsung Motors Co., Ssangyong Motor Co., and GM Korea Co. – sold a combined 505,212 vehicles in February, down 10.5 percent from a year ago, according to data compiled from the five car makers on Monday. Sales at home sank 21.7 percent – the largest fall in 11 years - to 81,722 units. Overseas shipments dropped 8.6 percent.

Sales took a dive despite longer working days against the same month a year ago when the Lunar New Year holiday fell.

The country’s largest automaker Hyundai Motor delivered total 275,044 units last month, down 12.9 percent from a year ago. Its domestic sales shriveled 26.4 percent to 39,290 units, and overseas sales 10.2 percent to 235,754 units.

Its sibling Kia Motors saw its sales down 5 percent on year to total 187,844 vehicles with domestic sales sliding 13.7 percent to 28,681 units against a year ago. Overseas sales retreated 3.2 percent to 159,163 units during the period.

Renault Samsung Motors, Korean operation of French carmaker Renault S.A., saw the largest fall of 39.8 percent on year after delivering 7,057 cars last month. It sold 3,673 units in Korea, down 25.4 percent on year, and 3,384 units elsewhere, down whopping 50.2 percent.

Ssangyong Motor’s car sales also lost 27.4 percent on year to 7,141 units. Domestic sales were off 32.7 percent to 5,100 units, with exports down 7.3 percent to 2,041 units.

GM Korea, Korean unit of the U.S. automaker General Motors Co., shipped 28,126 vehicles last month, down 14 percent from a year earlier as its outbound shipments dropped 16 percent on year to 23,148 units. Domestic sales fell 3.8 percent to 4,978 units.

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Poor sales on top of production disruption due to virus attack will cause huge dent on the first-quarter income statement.

Hyundai Motor had to stop Porter truck-making plant in Ulsan on Feb. 24 and the Ulsan 2 plant responsible for popular SUVs during the weekend after employees tested positive to COVID-19.

The suspended production is estimated to have disrupted output of 120,000 units in total.

The one-week shutdown of domestic lines could affect manufacturing of 34,000 Hyundai Motor vehicles and 29,000 Kia Motors cars, according to Korea Investment & Securities. Production disruption for three weeks could shave 2.4 trillion won ($2.01 billion) in sales for Hyundai Motor and 1.5 trillion won for Kia Motors.

“Outlook is much dimmer, give the dismal business in China,” said Kim Jin-woo, analyst at Korea Investment & Securities. China is the world’s biggest auto market and has a majority of auto parts factories that supply to most global car makers. But the country had to stop factory operation from end-January to mid-February, causing severe auto parts supply disruptions.

Worse, the community flare-up of the virus in Daegu City and North Gyeongsang Province poses a serious threat to the Korean auto industry because the areas are the country’s a manufacturing hub in the southern part of the peninsula. According to data released by Korea Auto Industries Coop. Association (KAICA) and Statistics Korea, 31.6 percent of auto parts makers are headquartered in or nearby Seoul, and 40.7 percent in Gyeongsang Province – 5.9 percent in Daegu City and 8.2 percent in North Gyeongsang Province.

The country’s leading tire maker Hankook Tire Co. halted some manufacturing lines in Daejeon and Geumsan for two days until Monday. A combined 37-40 million tires are produced at the two factories, which take up 36 percent of its total year output.

Nexen Tire Corp. also shut down its Changnyeong plant in South Gyeongsang Province on Sunday and Monday after an employee tested positive for the virus on last Friday. Operation started early Tuesday morning.

By Lee Jong-hyuk, Park Yun-gu and Lee Ha-yeon

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