The Changing Competitve Environment of the Korean Automotive Industry and Its Prospects
Korea ranked as the fifth largest automotive producer in the world with over on
e million units of export in 1995. But recently, one of the major automotive pr
oducers, Kia Motors, went bankrupt and this is indicative of many problems emer
ging in the Korean automotive industry.
Particularly, the domestic sales of automobiles are experiencing stagnation. Ac
cording to forecasting, dull domestic sales of the automobile industry are expe
cted to continue in. Growth of domestic sales will register below 4 percent ann
ual increase for 1996~2000 and will record no growth after 2000.
Competition is intensifying in export markets. Not only Japanease auto makers b
ut also American and European auto makers are developing and marketing small ca
rs. The small car is the main Korean export. Moreover, developed countries` aut
o makers are decreasing costs through restructuring.
Likewise, competition in the domestic market is increasing. Samsung Motors will
enter into the car market from 1998, soon after SSangyong Motors which started
to produce cars from mid-1997. Not only new entry of Korean car makers but also
import will be problematic for Korean car producers. Although imported units of
automobiles are about two percent of total domestic demand, their share will in
crease rapidly after 1999 because Korean import diversification program will be
eliminated in that year. The import diversification program has restricted impo
rts of Japanese automobiles.
Because of this difficult domestic situation, most car makers are hastening ove
rseas production and investment. But oversea production has many risks and acce
lerates the shrinking of internal production.
Thus, our forecast for 2000 is as follows:domestic sales of automobile will be
1,930 thousand units, export will be 1,800 thousand units, and production will
be 3,660 thousand units.
Forecast of the optimal supply capacity of the Korean automotive indust