Carmakers under foreign ownership in Korea performing their worst since 1998

2021.07.26 12:40:36 | 2021.07.26 13:15:39

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Output and sales by Korean car producers under foreign ownership have shriveled to the worst since 1998 in the wake of Asian financial crisis as they lose fast grounds against foreign brands amid slow upgrade by foreign parents fatigued by high labor cost and never-ending labor strife.

GM Korea, SsangYong Motor and Renault Samsung Motors produced a combined 240,319 units from January to June, off 12.3 percent on year and worst since 1998 when the country was under international bailout, data from the Korea Automobile Manufacturers Association showed on Monday.

Their domestic shipment plunged 35.4 percent on year to total 88,625 units in the first six months, the worst since 1998 when they sold a combined 73,169 units. GM Korea under American auto giant General Motors sold 33,160 units (down 19.3 percent), Renault Samsung Motors under France’s Renault sold 28,840 units (down 47.8 percent), and SsangYong Motor under India’s Mahindra & Mahindra 26,625 units (down 34.8 percent).

Luxury import car brands Mercedes-Benz and BMW sold more than the trio in Korea with sales volume of 42,017 units and 36,261 units, respectively.

The domestic producers under foreign carmakers have been losing new models to other manufacturing lines amid low productivity and regular labor strife. Chip shortage also added to the woes.

GM Korea, which started adjusting its production plan in February, is estimated to have lost about 40,000 cars in output in the first six months. Its first-half output stopped at 149,731 units, down 6.1 percent from the virus-ridden last year. Under the ongoing chip shortage situation, the carmaker has been running at half of the full capacity at the Bupyeong second plant in Incheon and the Changwon plant in South Gyeongsang Province.

Best-selling Chevrolet Trailblazer has been its only hope. Exports soared 50 percent to 81,991 units in the first half, and domestic sales up 11.4 percent to 10,633 units. The company now plans to produce new crossover utility vehicles at the Changwon plant from 2023.

Renault Samsung Motors produced 51,522 units in the first half, down 22.4 percent on year. It now is going all-out to offset the losses and improve the profitability with exports of the XM3 crossover utility vehicle to Europe where demand for eco-friendly vehicles keeps growing. The XM3 has been shipped out a total of 20,328 units up to June this year.

Exports of its hybrid models take up nearly half of all shipments to the European market.

The outlook beyond is grim as the company has not been allotted with additional new vehicle model from its parent this year. The XM3 launched last month is the last allotment.

Output from SsangYong Motor under court receivership shriveled 18.9 percent on year to 39,066 units over the same period due to the sluggish sales and production disruption due to slow parts from suppliers who worried about payment.

Rexton Sports facelift, released in April, sold 10,853 units, down 31.2 percent on year, while sales of Korando more than halved to 4,375 units.

The carmaker is running on halved staff through rotating leave and hopes to draw investment from California-based car importer HAAH Automotive Holdings in place of its Indian parent readying exit from Korea.

The poor performance by the three makers has been weighed down on the country’s auto capacity.

Automobile output from Korea’s five finished carmakers, including Hyundai Motor and Kia, slid from 2.02 million units in 2019 to 1.62 million units in 2020 and is projected to amount to 1.81 million units this year.

“Due to the weak performance of the three brands under foreign parents, Korea’s automobile output is expected to stop at the 3.5 million unit level for a while,” said Lee Hang-gu, a senior researcher at the Korea Institute for Industrial Economics & Trade.

By Pulse

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