S.Korea's car output tumbles to lowest in 17 years

South Korea's car output in 2021 is estimated to have tumbled to its lowest level in 17 years as a global shortage of semiconductors slowed down production lines, according to the Korea Automobile Manufacturers Association (KAMA).

In 2021, a total of 3.48 million new cars are projected to have been rolled out in South Korea, down 0.85% on-year, KAMA said in its recently published year-end report.

The production volume marked the lowest level since 2004 when the output came in at 3.47 million units.

Next year, KAMA forecast the country's auto output to rise 3.4% on-year to 3.6 million units in 2022, but still below the pre-pandemic level of 3.95 million units recorded in 2019, due to the prolonged chip shortage.

THIRD STRAIGHT YEAR BELOW 4 MILLION UNITS

Adding to concerns over the worst output in 17 years, the production volume missed the 4 million mark for a third consecutive year. The figure is regarded as the minimum number needed to sustain the country's automobile ecosystem.

If the output number remains below the mark, South Korean car parts suppliers and some automakers could be forced to close some of their operations, or undergo drastic restructuring, industry watchers warned on Dec. 26.

Domestic car sales, including imported brands, were projected at 1.73 units in 2021, down 9% on-year.

"It's not because cars were not sold, but we had no car to sell," said an industry source.

The delivery of a car of either Hyundai or Kia, the country's two largest carmakers, takes more than six months. Some popular models are delivered more than a year after their purchase contracts. 

RECORD SALES OF IMPORTED CARS, EXPORTS GROWTH

Imported car sales were estimated at a record 305,000 units for the entire year of 2021, making up 19% of cars sold nationwide. The sales volume represents an increase of 3 percentage points from the previous years' average.
 
The buoyant sales of imported cars, despite the chip shortage, were due in part to global carmakers' efforts to increase allocations of their vehicles to South Korea to meet rising demand, said imported car company sources.

Globally, vehicle demand grew 3.8% on-year to 84.15 million units in 2021. But the chip shortage resulted in lost production of 10 million units of cars this year, according to LMC Automotive, a market research firm.

On the export front, South Korea's car shipments are estimated to have risen 8.7% on-year to 2.05 million units in 2021. Hyundai and Kia, under the Hyundai Motor Group, are aiming for the No. 3 position in the global auto market by sales this year.

In 2022, domestic car sales are expected to remain little changed, considering that only six new models are set for release next year in addition to the expiration of a consumption tax cut for new car purchases, KAMA said in the report.

"Exports will continue to grow (in 2022), but the possibility of a prolonged labor strike for higher pay and regulatory risks cast uncertainty over the outlook," it added.

Write to Byung-uk Do at dodo@hankyung.com
Yeonhee Kim edited this article.