Strong won a major threat to S. Korean carmakers in 2018: think tank
SEOUL-- The strengthening won will emerge as a major threat to South Korean carmakers next year as they struggle to stay ahead of the competition, a local think tank said Sunday.
Given that carmakers in South Korea export 67 percent of the 4.5 million vehicles produced in the country, a strong won will doubtlessly impact price competitiveness on the global stage and eat into profitability, the Global Business Intelligence Center, a think tank belonging to Hyundai Motor Group, said in a briefing.
The biggest worry for local carmakers such as Hyundai Motor Co. and Kia Motors Corp. is that the yen looks set to become weaker next year due to the Japanese government's continued monetary easing policy, Lee Bo-sung, a director of the intelligence center, said.
"A weak yen helps improve profitability at Japanese carmakers and allows them to pay more attention to emerging markets, which have big growth potential," Lee said.
If the yen weakens, Japanese carmakers have further room to adjust their product prices in major markets to woo customers. It also means the value of dollar-denominated earnings goes up when converted into the Japanese currency.
The center forecast the dollar to hover at an average of 1,105 won next year from an estimated average of 1,130 won this year. The yen is expected to fall to 978 won from 1,018 won during the same period.
The pace of vehicle sales growth in the U.S. and China is expected to slow down in 2018 due to slowing economic growth, while vehicle demand in Europe, India, Brazil and Russia is forecast to rise further, according to the center.
In particular, global demand for SUVs will continue to rise in the next several years to account for up to 40 percent of overall sales by 2021 to 2022. SUVs are estimated to account for about 33 percent of all sales this year, the director said.
The world's vehicle market, meanwhile, is forecast to grow 1.2 percent to 93.72 million next year from 92.60 million this year, mainly helped by demand in emerging economies.
Hyundai and Kia, South Korea's two biggest carmakers, sold a total of 6.59 million autos in the January-November period, down 6.8 percent from 7.07 million units a year earlier.
Source: Yonhap News Agency