Automotive Industry Unable to Expect Year-End Domestic Demand Boost
Prolonged High Interest Rates Weaken Domestic Consumer Sentiment
Electric Vehicle Chasm and Domestic Political Variables
November Sales Decline Compared to Previous Month Despite Korea Sale Festa
The domestic new car market has sharply frozen. Every year, it is a common pattern for new car sales to increase at the end of the year with promotions added around the Korea Sale Festa, Korea's version of Black Friday in November, but this year, this formula did not apply. Moreover, with the electric vehicle chasm (a temporary demand slowdown before mass adoption) and domestic political variables added, there are growing concerns in the automotive industry that it is no longer possible to expect a year-end boom.
According to statistics from the Korea Automobile Mobility Industry Association (KAMA) on the 13th, despite the Korea Sale Festa discount event in November, last month's sales volume actually decreased by 0.4% compared to October. The Korea Sale Festa started in 2015, and except for its first year, this is the first time that new car sales in November have declined compared to October.
Last month, the domestic sales volume of six Korean automakers (Hyundai, Kia, Renault Korea, KG Mobility, Korea GM, Tata Daewoo) was recorded at 124,194 units (including OEM imports). Compared to the same month last year, this is a 6.5% decrease.
A banner announcing the 2024 Korea Sale Festa is hanging on Myeongdong Street in Jung-gu, Seoul. Photo by Kang Jin-hyung
The sales results are considered shocking given that automakers offered aggressive discount policies during the Korea Sale Festa. Hyundai gave discounts of up to 5 million KRW on the Ioniq 5 and 6, while Kia set discount rates of up to 12% for the Bongo electric vehicle, 9% for the Niro electric vehicle, and 7% for the EV6.
Korea GM ran a promotion offering up to 800,000 KRW support when existing Chevrolet owners switched to another model within the same brand, and KGM provided a 500,000 KRW discount benefit for vehicle purchases through friend referrals. Renault Korea also prepared special benefits of up to 1.4 million KRW on its main model, the Arkana E-Tech Hybrid.
An industry insider said, "With poor consumer sentiment and the electric vehicle chasm added, it was difficult to clear inventory despite large-scale national promotional events. Hybrid vehicles, which still have demand, sold, but it is difficult to clear the accumulated electric vehicle inventory."
With sluggish sales in November, each company is facing an emergency to clear inventory. It is common for companies to clear out their inventory through large-scale promotions during the Korea Sale Festa and prepare for the new year. This year, they are entering the new year burdened with inventory.
Because of this, domestic automakers are preparing stronger promotions in December than last month. Kia is running its own ‘EV Festa’ with discounts of 4 million KRW on the Bongo electric vehicle, 2.5 million KRW on the EV9, and 2 million KRW on the Niro electric vehicle. KGM is also holding its own promotional event called ‘Winter Sale Festa,’ enhancing benefits such as up to 6% off the Torres EVX and up to 5 million KRW off the Korando EV.
A domestic automaker sales office official said, "The contraction of the new car market is a global phenomenon. Especially in Korea, the ‘electric vehicle phobia’ caused by electric vehicle fires this summer has overlapped, and now everyone’s attention is focused on domestic politics, so there is little interest in purchasing new cars."
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