South Korea Autos Industry Update Quarter 2 2012

• Publication date: April 2012

Includes 3 FREE quarterly updates Although we expect the last two months of 2011 were an improvement on October for the domestic market, we have lowered our full-year projection to growth of 0.8% year-on-year (y-o-y) at 1.477mn units. Moreover, our bleak economic expectations for 2012, including an uptick in unemployment related to a slowdown in exports, have prompted a downgrade of our 2012 revenues growth projection to a ...

Includes 3 FREE quarterly updates

Although we expect the last two months of 2011 were an improvement on October for the domestic
market, we have lowered our full-year projection to growth of 0.8% year-on-year (y-o-y) at 1.477mn units.
Moreover, our bleak economic expectations for 2012, including an uptick in unemployment related to a
slowdown in exports, have prompted a downgrade of our 2012 revenues growth projection to a 2.5%
contraction, to 1.440mn.

This is not necessarily a collapse of the domestic industry . Total vehicle revenues have not crossed 1.5mn
units
since 2002, as the industry is largely saturated. We believe there are some areas for growth, but
unfortunately for the domestic brands these opportunities will be in the import industry .
New vehicle revenues in South Korea were up 4% y-o-y in H111 to 739,197 units, with production up 9.7%
to 2,302,600 units. A six-day strike over working hours and pay at component producer Yoongsung
Enterprises' Asian facility in May resulted in disruption to Hyundai Motor's SUV production.
According to the Korea Automobile Manufacturers Association (KAMA), South Korea exported
1,540,646 vehicles in H111, marking a 15.1% y-o-y increase, while imports stood at 58,569 units, an
increase of 17.2% on H110.

Following its takeover of South Korean carmaker Ssangyong in February 2011, Indian automaker
Mahindra & Mahindra has said it is keen to increase exports of Ssangyong's products to India and
Africa. In addition, Mahindra says it is in the process of assessing South Korea's autos segment, so that it
might bring its own models to the country in the future. Similarly, German carmaker Volkswagen has
said it will export its Passat to South Korea from 2012.
Hybrid vehicle revenues fell 38.3% y-o-y in February 2011, to 293 units. Nevertheless, South Korean
carmakers made progress in the development of new energy vehicles in Q211. In April, Hyundai unveiled
its Blue2 hydrogen fuel cell vehicle, with a fuel economy of 34.9 kilometres per litre, and in May,
Hyundai and Kia Motors launched their respective Sonata and K5 hybrids.

In the aftermath of the March 2011 earthquake and tsunami in Japan, Renault Samsung announced that it
was looking to increase the proportion of parts its sources locally, in particular its powertrains. In
addition, Mitsubishi Motors may turn to South Korean suppliers to overcome its shortage of electric
vehicle batteries.
In line with our projections, import revenues for 10M11 were up 18.9% y-o-y, at 87,928 units, and are on track
to break the 100,000-unit barrier for the first time. Moreover, we believe the signing of free trade
agreements with the EU and US will ensure double-digit growth in imports for the rest of our five-year
forecast period, with the potential for volumes to double by 2016. We believe European brands will be the
major beneficiaries, particularly those offering the high-end luxury products not catered for by the
domestic brands.

Passenger Car Industry in South Korea

CONTENTS .. 3
Executive Summary ..... 5
Industry SWOT Analysis . 7
South Korea Autos Industry Environment and Risk Analysis 7
South Korea Political Environment and Risk Analysis ... 8
South Korea Economic Environment and Risk Analysis 9
World Overview ... 10
Eurozone And EMs Pose Risks To 2012 Growth Outlook; US And Japan On The Rise ... 10
Passenger Car Sales (Units), Jan-December 2011 .... 10
Replacement Growth? ..... 10
Industry Risk/Reward Ratings .... 14
Data : Business Environment Ratings – Autos Market Asia Pacific . 17
Regional Overview ..... 18
Indian And Chinese Slowdowns Prompt Firms To Target ASEAN Growth 18
Macroeconomic Projection Scenario .. 21
South Korea – Economic Activity 23

Market Projection Scenario ... 25
Sales And Production 25
Data : South Korea Automotives Sales from 2010 to 2016 .... 25
Production .... 27
Data : South Korea Automotives Production from 2010 to 2016 . 27
Trade 28
Data : Trade, from 2010 to 2016 . 28

Competition Overview ... 29

Industry Analysis 29
Data : South Korea – Domestic Vehicle Sales, Jan-Oct .. 29

Industry Developments
.... 30
Company Developments .. 32
FTA And Competitive Production Will Boost US Vehicle Imports .... 34
News . 43
Company Monitor . 45
Is Proton Deal A Win-Win? .. 45
Company Profiles . 48
Hyundai Motor .... 48
Kia Motors ..... 50
Ssangyong Motor . 51
Renault Samsung Motors . 53

Passenger Car in South Korea

South Korea Passenger Car Density, Cars Per 1, 000 Of Population

• $ 250
• Industry data
• February 2013

Yearly, From 2004 To 2015
By Business Monitor International
Source: World Bank/BMI

• Industries : Passenger Car
• Countries : South Korea

South Korea Passenger Car Production, Units

• $ 250
• Industry data
• January 2013

Yearly, From 2001 To 2017
By Business Monitor International
Source: "Korea Automobile Manufacturers Association, Korean Automobile Importers &

• Industries : Passenger Car
• Countries : South Korea

South Korea Vehicle Sales, Units

• $ 250
• Industry data
• January 2013

Yearly, From 2001 To 2017
By Business Monitor International
Source: "Korea Automobile Manufacturers Association, Korean Automobile Importers &

• Industries : Passenger Car
• Countries : South Korea

South Korea Passenger Car Exports, Krwbn

• $ 250
• Industry data
• January 2013

Yearly, From 2005 To 2017
By Business Monitor International
Source: "Korea Automobile Manufacturers Association, Korean Automobile Importers &

• Industries : Passenger Car
• Countries : South Korea