Dark clouds are hanging over the local auto industry due to weakened conditions in and outside of the country, despite local automakers’ increased on-year global sales for February and aggressive marketing strategies to maximize demand at home.

According to figures presented by five local automakers -- Hyundai and Kia Motors, GM Korea, SsangYong Motor and Renault Samsung Motors -- they sold a combined 618,930 units in the local and global markets last month, up 2.5 percent on-year.

Experts attributed the boost to promotional events and enhanced new models, but warned that the figure does not represent the whole picture for the year.

“We mustn’t be misled by February’s sales result. Local automakers are doing everything they can to boost sales here because of the sluggish global economy. But conditions are worse here due to the anti-graft law,” said Kim Pil-soo, a professor of automotive engineering professor at Daelim University, referring to the new regulations that place limits on the price of gifts for specific occupations such as journalists and government officials.

Kim added that efforts made by auto firms can only bring about limited results, as economic recovery is a prerequisite for a sales boost in the automobile sector.

The gloomy forecast for the local auto sector is expected to continue due to decreased domestic demand, the emergence of China-based automobiles and uncertainty in the US and China, according to the Korea Chamber of Commerce and Industry.

The KCCI projected a 3.5 percent decline in auto sales at home this year, which is much bigger than the 0.4 percent decline seen last year.

Competition has gotten fierce for the automobile players here, partly due to the successful launch of the Kenbo 600, a SUV made by China’s BAIC Motor Corp. that features “fair quality and affordable pricing.”

On top of this, South Korean automakers may face a tougher environment in China following Lotte Group’s decision Tuesday to hand over land in Seongju County, North Gyeongsang Province, to station the Terminal High Altitude Area Defense system. This has led to Beijing adding pressure against local firms operating there.

China is Hyundai Motor Group’s top export country, accounting for over 20 percent of Hyundai, Kia Motors’ sales.

Hyundai Motor sold 1.13 million units in China last year, which stood for 23 percent of its global sales, while Kia Motors sold 650,000 units, which made up 21.6 percent.

Furthermore, a weak exchange rate is further hurting the price competitiveness of local automakers.

A US dollar was at around 1,200 won until the beginning of January, but has weakened to 1,154 won as of Friday.

Foreign automakers can import their products at a lower price, while local auto firms have to bear the burden of sales loss, Kim explained.

Despite the outlook and hurdles ahead, local auto companies are running various promotions to boost sales.

Hyundai Motor, South Korea’s largest auto manufacturer, is offering 1 million won ($865.87) off for Sante Fe SUV buyers who have purchased a recreational vehicle in the past, the firm said.

Kia Motors, the second-largest auto firm, is also running an event for customers who purchase its flagship mid-size sedans K3 and K5, in which they can get a navigation device installed for free of charge or receive laptops and discounts worth some 1.4 million won, the firm said.

SsangYong Motor, a local unit of Indian carmaker Mahindra & Mahindra Ltd., has extended the term for free after service to five years and 100,000 kilometers from the previous three years and 60,000 kilometers as part of its promotion for the New Style Korando C launched in January.

Renault Samsung Motors, the local unit of French automaker Renault S.A., will provide free repair service for customers who purchase the flagship sedan SM6 before March 20 and receive deliveries within this month.

Local automakers here are introducing new models with upgraded quality at lower or similar prices with previous ones, as part of efforts to foster demand.

Earlier this month, Hyundai Motor released the 2018 model-year Sante Fe that comes with an auto light system and a parking assistance system, newly added. The smart trim is priced at 28 million won, down 50,000 won from the 2017 model, while the premium trim remained the same at 29.85 million won.

Kia Motors rolled out the third-generation smart compact All New Morning in six years, touting strengthened safety, engine function and smart features.

The smart compact vehicle costs between 9.1 million won and 14.80 million won. The starting price is 400,000 won more pricey than the previous model, but the highest trim is 800,000 won cheaper. 

By Kim Bo-gyung (lisakim425@heraldcorp.com)