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Monday, December 11, 2017

Korean Car Makers ‘Face the wrong side of the yen’

Seoul — South Korean car makers face a major headwind from a weakening Japanese yen, which will boost rivals such as Toyota Motor next year, a Hyundai Motor think-tank says.
Picture: REUTERS


The fall in the yen will intensify competition in major markets, such as China and the US, where overall demand is expected to shrink in 2018, the think-tank said.
It projected that the Korean won would fetch 978 per ¥100 next year, compared with 1,018 this year.

The re-election in November of Japan’s Prime Minister Shinzo Abe, who favours massive monetary and fiscal stimulus policies, should point to further yen weakness, the think-tank said.
Toyota Motor in November raised its forecast for full-year operating profit, in part due to expectations of a weaker yen, which can make goods exported from Japan cheaper and can boost the value of overseas profits when repatriated.

"The currency environment is expected to deteriorate next year," Lee Bo-sung, a director of the think-tank, the Global Business Intelligence Centre said at a press briefing on Friday. The contents of the briefing were embargoed until 9am Sunday Seoul time.
"The weaker yen is expected to be the biggest challenge for South Korean car makers next year, as they are competing against Japanese," Lee said.
He said the price gap between Korean and Japanese cars had already narrowed due to the yen’s decline. For example, Hyundai’s Sonata sedan was 10% cheaper than Honda’s Accord in the US in 2011 and the gap was only 2% this year.

A weaker yen and higher profit have also allowed Japanese car makers to boost investment and gain market share in China and other emerging markets, Hyundai’s stronghold, he said.
Hyundai Motor has seen its net profit tumble by nearly one-third so far this year, and is on track to miss its annual vehicle sales target by a large margin, having failed to position for a consumer swing to sport utility vehicles and a diplomatic row with Beijing.

Reuters

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