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Korea, India car makers see strong Oct sales, Japan hit

Korea, India car makers see strong Oct sales, Japan hit
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First Published: Mon, Nov 01 2010. 01 41 PM IST
Updated: Mon, Nov 01 2010. 01 41 PM IST
Seoul/Tokyo:South Korean car makers posted record sales in October while their Japanese rivals saw double-digit declines in domestic sales for the month, underscoring how the former is gaining ground globally.
Japanese car makers face dwindling auto sales on their home turf with the end of government subsidies, whereas South Korean companies are expected to continue to outperform the global market in a weak recovery, driven by new model launches.
Although the Korean won is firming, the Japanese yen, which hit a 15-year high against the dollar on Monday, remains far stronger, hurting the price competitiveness of Japanese vehicles sold overseas.
Growing optimism for Korean carmakers sent their shares surging on Monday, with Hyundai Motor shares jumping 6.2% and Kia Motors shares up 10.2% up in a broader market up 1.7%.
“Things cannot be better for Korean automakers,” said Michael Sohn, an analyst at Macquarie Securities.
“Korean automakers are expected to log higher profits than Japanese peers this year, but their valuations are cheaper than Japanese makers. I expect rallies of Korean automakers to continue for the time being,” Sohn said.
Hyundai Motor, South Korea’s top automaker, saw its sales rise 10.4% at home and abroad in October from a year earlier, while second-ranked Kia Motors saw its total sales jump 29%.
The latest figures reinforced the bullish outlook for South Korean carmakers, which are expected to post strong earnings in the current quarter, after reporting forecast-beating profits for the third quarter last week, analysts say.
JAPAN WEAK
New vehicle sales in Japan tanked 23.2% in October, the first full month after government subsidies to replace cars older than 13 years expired, industry data showed.
Excluding 660cc minivehicles, sales in Japan slid 26.7%, the lowest on record for the month of October, an official at the Japan Automobile Dealers Association (JADA) said. It was also the first time that sales fell short of 200,000 vehicles in October in 42 years.
“We have no way of telling how weak demand will be in coming months,” said Michiro Saito, a manager at JADA.
But he added: “Many dealers were fearing bigger falls of 30-40%, so in that sense we’re a bit relieved.”
There was one fewer selling day in October compared with a year earlier.
Among the worst hit were brands with a relatively high ratio of models eligible for the government subsidies, Saito said.
Nissan Motor Co’s sales, excluding 660cc microcars, dropped 30.6%, Honda Motor Co’s fell 29.9%, while Mazda Motor Co’s sank 52.5%.
Leader Toyota Motor Corp, whose hybrid models still enjoy exemptions on some taxes under a separate government incentive scheme, saw a comparatively tame fall of 24.7%, including its high-end Lexus brand.
In contrast, imports, which are made up mostly of European-badged cars that were not eligible for the subsidies, jumped 29.6% in October.
Honda Motor reported last week a 150 jump in operating profit despite the strong yen, but decelerating demand at home and a strong yen cloud the outlook for Japan’s No. 2 car maker.
Its bigger rival Toyota is set to release its quarterly results on Friday.
INDIA A BRIGHT SPOT
Indian carmakers maintained double-digit sales growth in October on robust demand in one of the world’s fastest-growing markets.
While demand for cars in developed markets is stuck in low gear on anaemic economic recovery and the end of government subsidies, global automakers have been increasing their focus on emerging economies such as China, now the world’s largest auto market, and India.
India’s top car maker Maruti Suzuki reported a 39 jump in October auto sales from a year earlier, while Tata Motors posted a 21% rise in sales.
India is one of the fastest-growing markets for automobiles as a rapidly expanding economy, expected to grow over 8% this fiscal year, boosts incomes and consumer spending.
India’s automobile industry is likely to grow by 18-20% in the fiscal year that ends in March, according to the sector body, Society of Indian Automobile Manufacturers (SIAM).
Demand in India usually rises during the festive season that starts in September and peaks in November after Diwali, the Hindu festival of lights, when most employees get their annual bonuses.
But rising borrowing costs and slow pace of growth in component supplies are concerns for the carmakers.
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First Published: Mon, Nov 01 2010. 01 41 PM IST
More Topics: Auto | Cars | Sales | Kia Motors | Hyundai Motor |