South Korea’s exports of automobiles are expected to lose steam in the second half of the year on contracted demand in Europe and increased competition from foreign carmakers, a report said Wednesday.

According to the report compiled by the Korea Automotive Research Institute, South Korea is forecast to export 1.68 million units of cars in the July-December period, up 4.3 percent from a year earlier.

In the first six months of the year, car exports increased 10.4 percent on-year to 1.7 million units.

The KARI report also predicted that sluggish European demand stemming from the region’s persistent debt crisis will weigh heavily on the global car market.

Global demand for cars is forecast to grow 4.3 percent on-year to 38.7 million vehicles in the latter half of the year, compared with a 7.2 percent growth in the first half.

Automobile demand from the European Union countries will contract 0.7 percent on-year, it added.

Along with the contracted demand, South Korean cars will also face other trade barriers throughout the world, said the report.

The EU is considering France’s request for prior surveillance of South Korean car imports, and Brazil has decided to raise taxes on imported cars by 30 percent.

In addition, Japanese car companies like Toyota Motor Corp. and Honda Motor Co. are gearing up to retrieve their earlier market shares as they are on their way to recover from the losses incurred by the massive earthquake in March last year.

Toyota’s sales in the United States jumped 23.9 percent on-year in July and sales of Honda soared 46.4 percent on-year.

The KARI report said that the sluggish car shipments can affect the entire exports of South Korea, which depends highly on trade for its growth.

Exports of cars and auto parts accounted for 13.3 percent of the country’s total exports in the six-month period, which grew a mere 0.6 percent on-year. (Yonhap News)