Korean carmakers’ local sales to fall to 9-year low on chip shortage, rates

[Source : Hyundai Motor]

Domestic sales of Hyundai Motor Co. and other Korean auto brands in 2022 are expected to fall to the lowest level in nine years due to interest rate hikes and economic downturns combined with global supply chain disruptions.

According to the Korea Automobile Manufacturers Association (KAMA) on Sunday, domestic sales of Korean cars are expected to stand at 1.39 million units this year, a 2.5 percent fall from last year’s 1.42 million units and the lowest since 2013.

Domestic car sales of Korean automaker have continued to decline after selling 1.60 units in 2020. In contrast, domestic sales of imported cars have maintained at around 300,000 units.

Chips shortages in the car industry eased in the second half, but the global economic downturn and rapid rate hikes undermined consumer sentiment. New car purchase contracts were canceled one after another as interest rates on car installments rose. Hyundai Capital Services Inc.’s new car installment interest rate based on 36 months more than doubled to 5.9 percent in November from 2.7 percent in April.

Institutions have mixed views on the outlook for next year. KAMA predicted that domestic sales of Korean cars will increase by 2.2 percent on year to 1.42 million units in 2023, driven by recovering demand with eased chip supply in the first half of next year. Demand may increase late next year with new car launches.

The Korea Automotive Technology Institute predicted that the decline in domestic sales of Korean cars will continue next year. The bottleneck in the supply of automotive semiconductors will be somewhat resolved, but some chip companies are revising their investment plans due to the economic downturn, and it remains to be seen whether they will increase production of low-profit automotive semiconductors.