Boston, MA -- (SBWIRE) -- 02/27/2013 -- Data throughout 2012 showed that sales of South Korea's five domestic brands were subdued, thereby dragging down production. Despite healthy overseas demand, we forecasted that total sales would drop over 8% in 2012, with 1.35mn units shifted. This prompted BMI to revise sales and production forecasts for the year downward in our last quarterly report. On the upside, our export projections improved, although we stated that demand in Europe would remain the biggest threat to our outlook, and that the forecast for 9.5% growth in exports would not be enough to prevent a contraction in output. Things have not changed greatly in Q412.

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This quarter we are maintaining our 2012 vehicle sales forecasts of 1.35mn units. BMI forecasts 2013 vehicle sales to grow at a lackluster 3.4% and come in at 1.39mn units due to the high level of consumer debt and poor economic sentiment which will crimp private consumption. Consumer confidence is not expected to improve going into next year and our country risk team forecasts 2013 GDP growth of just 3.0%. Hence, we are not bullish on growth for 2013 vehicle sales.

According to a report released by South Korea's Ministry of Knowledge Economy, the country's auto production saw a drop of around 4.3% in October 2012 as a result of weak demand, reports NZ Week. The report showed automobile production by South Korea-based automobile companies, including Hyundai Motor, Kia Motors, GM Korea, Renault Samsung Motors and Ssangyong Motor, reached 396,677 vehicles in October 2012, which represents a fall of 4.3% y-o-y.

According to latest statistics from the Korean Automobile Manufacturers Association (KAMA), vehicle sales in September 2012 came in at 116,484 units, a decline of 6.8% y-o-y. Month-on-month sales, however, saw a surge of 35.5%. We believe that one of the reasons for the m-o-m surge in sales was due to Hyundai, the biggest automaker in the country, resolving its labour dispute in September (see our online service, September 04 'Labour Agreement Vital To Hyundai's Targets'). During the dispute, Hyundai factory workers staged strikes which resulted in a cut in production. This had an impact on vehicle sales for August. However, once an agreement between the unions and management was reached, Hyundai announced its aim of recovering lost production through overnight shifts. This contributed to the strong vehicle sales numbers for September.

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