South Korean auto firms reported a 14 percent rise in December sales, reflecting greater domestic demand before a tax rule change, and leaders Hyundai and Kia revealed ambitious 2006 sales targets.
In 2006, South Korea's auto industry is set to benefit from an anticipated recovery in the home market that should offset the impact of a strengthening won on exports, analysts said on Monday.
Hyundai Motor Co, the country's biggest carmaker, said it aimed to sell 2.69 million completed vehicles in 2006, 15 percent more than in 2005.
Revenue in 2006 is targeted at 42 trillion won ($41.6 billion), a fifth higher from an estimated 35 trillion won in 2005, the company said in a statement.
Hyundai's affiliate and number-two Kia Motors Corp aimed to sell 1.43 million completed vehicles, up 17 percent from 2005. It targets 24 percent revenue growth to 21 trillion won.
"Carmakers will enjoy stronger domestic sales as the economy gradually recovers and new models they introduced in the second half of 2005 are creating new demand," said Choi Dae-sik, an analyst at CJ Investment & Securities.
"They can post a double-digit growth rate in the home market this year."
In 2005, South Korean carmakers' combined auto sales grew 15.6 percent to 5.22 million vehicles, including exports of half-finished cars. A 19.1 percent surge in exports led the growth, while domestic sales rose only 4.3 percent from 2004.
In December alone, auto makers reported 14 percent sales growth from a year earlier as domestic demand surged nearly 30 percent, with consumers rushing to dealerships to buy cars before the end-2005 expiry of temporary tax benefit on durable goods.
Hyundai, which controls half the home car market, saw sales rise 9 percent to 251,082 units last month, led by a 32 percent jump in domestic sales. Its Sonata sedan remained at the top of the country's best-selling list for seven years in a row, Hyundai said.
Kia posted record monthly sales in December, selling 128,259 vehicles, up 4 percent from a year ago. Its sales at home soared 38 percent helped by demand for its new sedan Lotze, while exports fell 2.4 percent.
Shares in Hyundai, the country's fourth-biggest stock, rose 1.13 percent to end at 98,400 won, leading the wider market's 0.72 percent gain. Kia shares jumped 5.46 percent to 28,000 won, bolstered by the robust December sales.
Hyundai and Kia said they would focus on enhancing capacity at overseas plants to meet their 2006 sales goals.
Analysts said overseas operations will set the tone for future earnings for the two makers and expected increasing output abroad could offset higher domestic labour costs.
Chung Mong-koo, chairman of Hyundai and Kia, cited higher raw material and labour costs, and the firmer won currency as key challenges in 2006, according to his new-year message provided by the company.
Hyundai said it would increase production from overseas plants in the United States, China and India, while starting to build new plants in China and eastern Europe. Kia is set to begin production at its Slovakia plant in 2006.
Hyundai and Kia combined rank as the world's seventh-biggest auto maker and they aim to become one of the world's top six by 2010.
December sales by GM Daewoo Automotive and Technology Co, in which General Motors Corp holds a stake, jumped 36.4 percent from a year earlier to 124,721 units. Ssangyong Motor Co, owned by China's Shanghai Automotive Industry Corp, posted a 39 percent surge in the December sales to 15,490 units.
Renault Samsung Motors Inc, the South Korean unit of French Renault SA, sold 11,995 units in December, up 12.7 percent from a year earlier.
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