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Current Automotive Market Trends in South Korea (2023)

GOOVER DAILY REPORT 6/12/2024
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TABLE OF CONTENTS

  1. Introduction
  2. Market Overview
  3. Hyundai Motor Group
  4. Imported Car Brands
  5. Electric Vehicle (EV) Market
  6. Challenges and Future Trends
  7. Glossary
  8. Conclusion
  9. Source Documents

1. Introduction

  • This report analyzes the current automotive market trends in South Korea, focusing on the sales data of both domestic and imported car brands, market share distribution, and the increasing popularity of electric vehicles (EVs).

2. Market Overview

  • 2-1. Overview of South Korea's automotive market in 2023

  • In 2023, South Korea's automotive market faced several shifts in sales dynamics. Five key Korean automakers reported various changes in domestic and global sales throughout the year. For instance, in January, new domestic vehicle sales increased by 2.3% year-over-year to 102,719 units, despite Hyundai Motor experiencing a slight decrease of 3.3%. By February, the market saw a significant dip of 20.7% in domestic sales compared to the same month the previous year, which can be attributed to the reduced number of business days and delays in government subsidies for EVs. Similarly, March, April, and May saw decreases in new vehicle sales by 14.6%, 7.3%, and 10.6% respectively. These fluctuations were influenced by factors such as consumer sentiment, economic conditions, and production adjustments within the automakers.

  • 2-2. Economic factors influencing vehicle sales

  • Several economic factors played critical roles in influencing vehicle sales in South Korea during 2023. Rapid inflation and persistently high interest rates on loans significantly dampened consumer sentiment and purchasing power, leading to reduced demand for new vehicles. Sales data for March through May 2023 highlighted these impacts, showing consistent declines in domestic sales across these months. For instance, delays in the delivery of hybrid vehicles and high-interest rate burdens were particularly mentioned as contributing to subdued consumer sentiment. Additionally, the automotive industry faced complications such as the delayed announcement of EV subsidies, which further impacted sales figures, especially for electric vehicles and hybrids.

  • 2-3. Consumer behavior and preferences

  • Consumer behavior and preferences in South Korea's automotive market have shown notable trends in 2023. There was a clear shift towards electric vehicles (EVs) despite the broader global downturn in EV sales. In the first four months of the year, registrations of pure EVs significantly rose to 13,863 units, accounting for 18.2% of overall vehicle imports. Tesla's models, primarily the Model Y and Model 3, dominated the import EV market with 6,016 and 1,731 registrations respectively. Moreover, the preference for hybrid vehicles also increased, with registrations rising by 39.3% year-over-year to 37,085 units, making up 48.7% of all imported cars in the January-April period. Conversely, the demand for gasoline and diesel vehicles continued to decline, with gasoline vehicle registrations dropping by 37% and diesel vehicle registrations plummeting by 71% during the same period.

3. Hyundai Motor Group

  • 3-1. General sales performance of Hyundai and Kia

  • Hyundai Motor Company (including the Genesis brand) reported global vehicle sales of 349,194 units in May 2023, reflecting a growth of 7.8% compared to the same period last year. The first five months of 2023 saw total sales reaching 1,705,878 vehicles, an 11% increase year-over-year. Hyundai and Kia have both shown strong sales performance, particularly in the UK market, where they are expected to post record sales this year. Hyundai sold 173,428 vehicles in the UK from January to October 2023, up 8.7% from the previous year. Kia sold 96,784 units during the same period, making them the fourth-largest car brand in the UK.

  • 3-2. Popular models and market share

  • Hyundai's top-selling EV models include the Ioniq 5, Ioniq 6, and Kona Electric. The Ioniq 5 set a new monthly wholesale record of 11,772 units in May 2023. Kia's best-selling models in the UK are the Sportage, which sold 31,575 units, followed by the Tucson SUV, which sold 29,990 units. In the first ten months of 2023, Hyundai and Kia’s combined sales of eco-friendly vehicles, including electric and hybrid cars, rose to 80,442 units, up 6.7% year-over-year. In the global electric vehicle market, Hyundai Motor Group became the second-largest EV maker in the U.S. after Tesla by selling approximately 94,000 EVs in 2022.

  • 3-3. Electric vehicle sales and future outlook

  • Hyundai's plug-in electric car sales continued to grow significantly. In May 2023, the company reported that plug-in electric car wholesale shipments increased by 25% year-over-year to 28,321 units, with all-electric car sales rising by 31% to 23,415 units. Year-to-date, Hyundai's BEV shipments were up 72% to 119,099 units. The Ioniq 5 and Ioniq 6 accounted for nearly 70% of Hyundai’s total EV sales. Hyundai’s dedicated battery electric models, such as the Ioniq 5 and Ioniq 6, have solidified the company’s position in the EV market. The anticipated introduction of high-performance variants like the Ioniq 7 N and the luxurious Genesis GV90 suggests continued growth and innovation in Hyundai’s EV lineup.

  • 3-4. Challenges faced and recalls

  • Hyundai Motor Group faced significant challenges, including a recall of around 170,000 EVs due to potential sudden power loss issues involving five models (Ioniq 5, Ioniq 6, and Genesis GV60). The recall, affecting about 600,000 EVs globally, is the largest since 2021 and is related to faults in the Integrated Control Charging Unit (ICCU). This issue prevents 12-volt battery charging and can result in sudden power loss, thereby requiring software updates and possible replacement of faulty ICCUs. This recall addresses long-standing customer complaints and regulatory scrutiny from authorities like the U.S. National Highway Traffic Safety Administration, which highlighted potential over-current issues within the ICCU.

4. Imported Car Brands

  • 4-1. Market share of imported car brands

  • In 2023, the most popular non-domestic car brand among South Korean consumers was Mercedes-Benz, which took up around 28.3 percent of non-domestic car registrations. German car makers dominated the imported car market in South Korea, with all top registered non-domestic car brands being based in Germany. (Source: Statista)

  • 4-2. Popular imported brands and models

  • Nearly 1 out of 5 imported vehicles in South Korea were battery-powered in the January-April period, despite a global slowdown in EV sales. The most registered imported EV models in this period were Tesla’s Model Y (6,016 units), Tesla’s Model 3 (1,731 units), BMW’s i5 eDrive40 sedan (644 units), and Audi’s Q4 e-tron SUV (621 units). (Source: Korea Bizwire)

  • 4-3. Sales performance and consumer preferences

  • Registrations of pure EVs jumped to 13,863 units from 5,417 during the same period of the previous year, accounting for 18.2 percent of overall vehicle imports. Meanwhile, registrations of imported gasoline hybrid cars rose 39.3 percent year-on-year to 37,085 units, making up 48.7 percent of all imported cars in the January-April period. However, registrations of imported gasoline cars fell 37 percent to 2,828 units, and diesel-powered car registrations dropped 71 percent to 2,084 units. (Source: Korea Bizwire)

5. Electric Vehicle (EV) Market

  • 5-1. Sales growth and market share of EVs

  • In the first three quarters of 2023, electric vehicles (EVs) accounted for 15.6% of global automobile sales, with EV sales reaching 10,037,000 units. This represented a 39.3% increase from the same period in the previous year. Battery electric vehicles (BEVs) were the most common type, making up 7.23 million units, followed by plug-in hybrid electric vehicles (PHEVs) with 2,799,000 units, and fuel cell EVs with 8,000 units. Hybrid electric vehicle (HEV) sales amounted to 5,767,000 units.

  • 5-2. Popular EV models

  • In Hyundai Motor's lineup, the top-selling EV models in June 2023 were the Hyundai Ioniq 5 with 10,143 units and the Hyundai Kona Electric with 7,877 units. The Hyundai Ioniq 6 noted over 6,400 units. These models accounted for a significant portion of Hyundai's total EV sales.

  • 5-3. Hyundai's role in the EV market

  • Hyundai Motor Group placed seventh globally in EV sales from January to September 2023, selling 378,462 units, including BEVs, PHEVs, and hydrogen fuel cell cars. Hyundai's BEV sales amounted to 145,059 units for the year-to-date, marking a 76% increase year-over-year. Hyundai's Ioniq 5 and Ioniq 6 models accounted for over 60% of its total EV sales. Hyundai also ranked fourth globally when including HEV sales, with 963,544 units sold.

  • 5-4. Comparative analysis with global EV market

  • China led the global EV market with 6.264 million units, representing 62.4% of global EV sales, followed by Europe with 2,193,000 units (21.8%) and the United States with 1,034,000 units (10.3%). Korea and Japan recorded 125,000 units and 105,000 units respectively. Sales figures for major EV manufacturers included BYD with 2,146,999 units (21.4% market share) and Tesla with 1,580,134 units (15.8% market share). Hyundai Motor Group, with 378,462 units, ranked seventh globally.

6. Challenges and Future Trends

  • 6-1. Automotive recalls and their impact

  • In 2023, Hyundai Motor and Kia announced the recall of approximately 170,000 electric vehicles (EVs) due to sudden power loss concerns. This recall includes models such as the Ioniq 5, Ioniq 6, Genesis GV60, and Kia EV6. The root cause of these issues lies in the Integrated Control Charging Unit (ICCU), which is responsible for powering both the hybrid vehicle battery and the low-voltage 12-volt battery. The error in the ICCU leads to the inability of the 12-volt battery to charge, resulting in sudden power loss. This latest recall, scheduled to start on March 18, 2023, stands as the largest EV recall since 2021. Hyundai will update the software for the affected vehicles and replace faulty ICCU components at no extra cost if needed. The recall follows years of customer complaints and ongoing investigations, including a preliminary summary from the U.S. National Highway Traffic Safety Administration, which highlighted over-current issues within the ICCU damaging transistors. Besides Hyundai and Kia, other automakers like Stellantis and Tesla have also announced recalls over various safety concerns. The recall impacts Hyundai and Kia's growth in the global EV market, notwithstanding their combined sales of 516,441 EVs worldwide in the previous year, representing a 39% year-on-year increase.

  • 6-2. Economic challenges

  • The South Korean car sales market has been experiencing a decline over recent years, contracting at an average annual growth rate of 2.6%. Contributing factors include the economic slowdown, which has reduced disposable income, and the ongoing semiconductor shortage, making new car production difficult. Additionally, the rise of electric vehicles has altered market dynamics, taking market share away from traditional gasoline-powered cars. As of 2022, electric vehicles accounted for 10.4% of new car registrations, up from 7.1% in 2021. Another significant trend is the growing popularity of online car purchases, with 15.0% of new car sales made online in 2022, compared to 12.0% in 2021.

  • 6-3. Predictions based on current market data

  • Based on current market data, the South Korean car sales market is expected to remain weak with a forecasted shrinkage of 1.0% on an annual basis. Factors such as the economic slowdown, semiconductor shortage, and increased adoption of electric vehicles continue to create an uncertain environment for the market. However, the rise in electric vehicle registrations and the trend towards online car buying indicate significant shifts in consumer behavior, possibly paving the way for new market dynamics in the future.

7. Glossary

  • 7-1. Hyundai Motor Company [Company]

  • A leading automotive manufacturer in South Korea, dominating the market with models like the Hyundai Grandeur. Known for significant investment in electric vehicles, including the Ioniq series.

  • 7-2. Kia Motors [Company]

  • Another prominent player in South Korea's automotive industry, known for models such as the Sportage and EV6. It has a substantial market share, focusing on both traditional and electric vehicles.

  • 7-3. Tesla [Company]

  • An American electric vehicle manufacturer making significant inroads in the South Korean market with popular models like the Model Y and Model 3.

  • 7-4. Genesis [Brand]

  • Hyundai's luxury brand, known for models like the G80 and GV80. It has expanded its electric vehicle lineup with models such as the GV60.

8. Conclusion

  • This report consolidates the status of the automotive market in South Korea as of 2023, highlighting the dominance of domestic brands like Hyundai and Kia, the rise of electric vehicles, and the growing competition from imported brands. The market is experiencing a shift towards more sustainable and technologically advanced vehicles, despite several economic and regulatory challenges.

9. Source Documents