The Baldwin-Wallace College Journal of Research and Creative Studies, Fall 2007, 1(1):12-24
Performance of the South Korean Automobile Industry in the Domestic and
United States Markets
Robert R. Ebert1 and Mariel Montoney2
1
2
Department of Economics, Baldwin-Wallace College, 275 Eastland Rd., Berea, OH 44017; Economics Program,
Baldwin-Wallace College, 275 Eastland Rd., Berea, OH 44017
The South Korean automobile industry has undergone considerable growth since its inception in the 1960s.
That growth was initially driven by domestic demand.
Since the Asian financial crisis of 1997, however, production increases for the South Korean automobile industry have been primarily a function of export sales.
The research presented here explores changes in the structure of demand in its two principal marketsdomestic South Korean market and the United States market. Two models of demand are developed- one for each of the markets. Several macro economic variables
are identified that have a statistically significant relationship with the demand for automobiles in each of the markets. An interesting finding of the research is that the factors apparently driving demand are different in the two markets suggesting the structure of automobile demand in South Korea differs significantly from the demand for that country’s vehicles in the United
States. A major challenge facing the South Korean automobile industry is how to utilize its capacity when confronted with slowing growth in sales in both the domestic and United States markets.
Key words: Economics of Korea; Automobile Industry; United States Markets; Domestic Markets
The Republic of South Korea (RSK) produced
23,000 motor vehicles in 1971, which was 0.06 percent of world output. In 2005, South Korea produced nearly 3.7 million motor vehicles or 5.6 percent of the world output (Ward’s Auto World,
2007). During the twenty years from the mid
1980’s to 2005, both the domestic South Korean automobile market and the market for South
Korean vehicles in the United States expanded significantly. Korean domestic sales of automobiles quadrupled in that time period.
Industry were its exports to the United States market during the past twenty years, but especially during the 1998 through 2005 period, when the sales of South Korean built vehicles increased 22.6% annually and 316.4% overall
(see Table A-2 in the Appendix).
The South Korean automobile industry emerged around 1962 with South Korea’s first national economic development plan. In this early stage, most vehicles were knock down models; i.e., a kit containing most components which was shipped from another country such as Japan. At this time, Kia Industry Co., Ha-Dong-Hwan
Motors, and Saenara (which later was taken over by Shinjin Motors) were the only established South Korean automobile firms.
While the literature provides considerable background on the globalization process of the
South Korean automobile industry (see for example, Hyun, 2003) there has not been significant analysis of the development of demand in the Korean domestic auto market or in principal foreign markets for Korean automobiles such as the United States. Here, recent developments in the South Korean
Automobile Industry are summarized with the principal question addressed being; what factors have led to the expansion of South Korean domestic demand and United States demand for
Korean Vehicles?
The South Korean government put its second national economic development plan into effect between 1967 and 1971. This was the time during the Park regime when the government began to play an active role in trying to stimulate the economy. Government regulations designed to stimulate the achievement of economies of scale in the auto industry led to local content reaching 90% by the early 1980. At this time,
Hyundai and Asia Motors joined the industry.
Shinjin Motors allied with GM (General Motors) and became known as General Motors Korea, which was then taken over by the Daewoo Auto
Group. Kia took over Asia Motors, but continued to produce vehicles from knock down kits (Hyun,
2003).
LITERATURE REVIEW
Between the years of 1998 and 2005, South
Korean automobile production increased annually by 6.86% and by 59.1% overall (see
Table A-1 in the Appendix). Helping stimulate the growth of the South Korean Automobile
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The domestic market in South Korea was protected until the late 1990’s due to the government’s nationalist and protectionist policies and its placing of restrictive regulatory barriers on Foreign Direct Investment inflows into the automobile sector (Park, 2003).
Therefore, South Korean automobile firms dominated their domestic market with little foreign competition until 1999.
1996). Overcapacity in the SKAI created financial problems for Samsung which went bankrupt in 1999. Controlling interest in
Samsung Motors was purchased by Renault of
France in 2000. Renault Samsung Motors built
118,438 vehicles in 2005, primarily for the South
Korean Market (Renault, 2007).
General Motors Daewoo (GM Daewoo, 2003) is a result of General Motors taking over the then bankrupt Daewoo in 2002 (Kirk, 2002). Daewoo entered the SKAI in 1962 as Saenara Motor
Company which was taken over by Shinjin Motor in 1965 (Kang, 1997). By the 1970s, Shinjin was South Korea’s leading automobile builder.
In 1972, GM took a 50 percent investment share in the firm. Faced with increasing competition in the SKAI in 1982, GM sold the majority interest in the firm to the Daewoo Group chaebol (Asia
Pulse, 2002). The Daewoo – GM relationship ended in 1992, over management disagreements (Business Week, 1999). Faced with debt problems and weakening markets due to the Asian Financial Crisis of 1997-1998,
Daweoo put the automobile operations up for sale. General Motors showed renewed interest in Daewoo and completed a takeover of what is now known as GM Daewoo in 2002 (Kirk, 2002).
For the domestic and global markets, including the United States, GM Daewoo builds vehicles that compete with low-priced Kias and Hyundais
(GM Daewoo, 2003). The GM Daewoo operation is successful with combined domestic and export sales exceeding 1.5 million units in
2006 (Choe, 2006).
Along with the influence the South Korean government has, the chaebol have played an important role in the development of the South
Korean automobile industry. The role of the chaebol in the South Korean economy is discussed elsewhere (see, for example, Kennett,
2004). Only a brief description is offered here.
Chaebol can be formally defined as large, diversified industrial groups. These groups benefited mainly from government controlled entry into the industry, access to raw material and imports, and financing from the government.
SOUTH KOREAN AUTOMOBILE INDUSTRY
PROFILE
A thorough discussion of the history and structure of the South Korean Automobile
Industry (SKAI) is beyond the scope of this paper. However, a brief profile of the existing firms is helpful in understanding the nature of the industry and its marketing efforts as well as the restructuring of the industry since the South
Korean market was liberalized. The current structure of the SKAI consists of both relatively small and very large firms and is a result of firm failures and consolidations over a period of approximately forty years.
The dominant SKAI auto producer is HyundaiKia. In 2006, the SKAI produced 3.8 million motor vehicles of which 2.7 million or 71 percent were built by Hyundai-Kia (Automotive News,
2007).
Ssangyong Motor Company is a relatively small sport utility motor vehicle builder that sold only
121,196 units in 2006. It traces its history to
1954 when jeeps were built for the U.S. Army by the Ha-Dong-Hwan Motor Workshops. That firm was sold to the Ssangyong Group in 1988 which sold controlling interest to Daewoo in 1997.
When Daewoo faced financial problems in 2000, it sold its interest in Ssangyong which then became independent. In 2004, a 49 percent interest in Ssangyong was purchased by
Ssangyong Automotive Industry Corporation of
China (Ssangyong).
Hyundai and Kia had been separate companies until 1998 when Hyundai purchased Kia after the latter had gone through bankruptcy (New York
Times, 1998). Kia began in 1944 as Kyungsung
Precision Industry. After building motorcycles and a three-wheeled truck, it produced its first passenger car in 1974. Kia became the second largest South Korean auto producer after
Hyundai and expanded rapidly until the Asian financial crisis of 1997-98 caused a decline of 49 percent in domestic South Korean auto sales in
1998. Kia was declared bankrupt in 1998 (Cho,
1998).
The Samsung Business Group attempted to enter the SKAI in 1995 and built a plant with annual capacity of 500,000 units (Gadacz,
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SOUTH KOREAN DOMESTIC AUTOMOBILE
MARKET
The development of the domestic market for motor vehicles (automobiles and trucks) in
South Korea is the focus of this section.
Macroeconomic data on the South Korean economy from the World Economic Outlook of the International Monetary Fund, data from the
United States Energy Information
Administration, the Korea Automobile
Manufacturers Association (KAMA), and Korea
Automobile Import and Distributors Association
(KAIDA) constitute the sources of the statistics used in developing a basic multiple regression model of demand for automobiles in South
Korea.
The analysis is based on the assumption that basic macro economic variables are significant determinants of demand for motor vehicles in South Korea. The significance of cyclical forces and macroeconomic variables is suggested by publications of the Korean
Automobile Manufacturer Association (KAMA).
For example, the KAMA explanation for weakness in vehicle sales in South Korea in
2006 was economic recession, an unstable employment situation, and higher oil prices
(KAMA, January 10, 2007).
Figures 1 and 2 show automobile sales in South Korea compared to the unemployment rate and Gross Domestic Product volume index.
The data plotted in Figures 1 and 2 suggest a cyclical relationship exists between the indicated economic variables and auto sales in South
Korea.
Hyundai Motor Company was founded in 1967 as the automotive affiliate of the Hyundai Group chaebol. Hyundai Motor expanded rapidly in its first decade and was able to attain a 54 percent domestic South Korean market share by 1977
(Hyun, 2003). The Hyundai plant in Ulsan is one of the largest automobile manufacturing complexes in the world with an annual capacity of 1.6 million units (Hyundai Annual Report,
2005).
The Hyundai Group’s Engineering and
Construction Company was reorganized in 2000 to restructure its debt. That restructuring led to the separation of the Hyundai Motor Company from its chaebol partner and Hyundai Motor becoming an independent company (New York
Times, 2000). In the first decade of the 21st
Century, Hyundai has continued its global expansion which included establishment of assembly plants in Turkey, China, India, and
Alabama in the U.S. (Hyundai Annual Report,
2005).
Hyundai began importing cars into the U.S. market in 1986 and Kia entered the U.S. market in 1994. The Hyundai-Kia combined sales in the
U.S. exceeded 730,000 units in 2005.
Expanding demand for its vehicles in the U.S. led Hyundai to establish an assembly plant in
Alabama which began production in 2005 and
Kia has begun work on a U.S. assembly plant in
Georgia (Hyundai, 2005; Automotive News,
2006).
Figure 1. South
Korean Domestic
Automobile Sales and
Unemployment Rate
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The Baldwin-Wallace College Journal of Research and Creative Studies, Fall 2007, 1(1):12-24
Figure 2. South Korean
Domestic Automobile
Sales and Gross
Domestic Product
Based on the evidence, therefore, a model was developed to test the hypothesis that the sales of vehicles in South Korea are a function of the
Real Gross Domestic Product, the unemployment rate, the bank lending rate, and the market price of a barrel of oil. The expected relationship of the variables is given below. The reliability of statistical data on the South Korean automobile industry prior to 1987 is problematic.
Therefore the time frame that is covered for the development of the model is 1987 through 2005.
The analysis concludes with 2005 because that was the last year for which macroeconomic data were available at the time the study was undertaken. of motor vehicles in South Korea. That is, as
RGDP volume increases it is expected that economic conditions are expanding which establishes an environment where motor vehicle sales will increase.
UNEMPR: the percentage of unemployment in
South Korea, annual rate, 1987 through 2005
(IMF). There is a suggested negative relationship between UNEMPR and the total sales of motor vehicles in South Korea. That is, as UNEMPR rate increases, rising unemployment will reduce the number of potential purchasers of motor vehicles and, therefore, contribute to a decline in the vehicle sales. TOTSALES: the dependent variable is the sum of all automobile, commercial vehicle and imported vehicle sales in South Korea, annual data 1987 through 2005 (KAMA and KAIDA).
LENDRATE: The bank lending rate in South
Korea, annual average rate, 1987 through 2005
(IMF). There is a suggested negative relationship between LENDRATE and the total sales of motor vehicles in South Korea. That is, as LENDRATE increases, the higher cost of borrowing is expected to increase the cost of motor vehicle ownership and decrease the sales of vehicles.
RGDP: Real Gross Domestic Product of South
Korea, annual data 1987 through 2005 on an index number basis with the volume of Real
GDP in 2000 equal to an index number of 100
(IMF). There is a suggested positive relationship between RGDP and the total sales
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Figure 3. South Korean Automobile Production, Exports and Domestic Sales
OILPRR: The real (inflation adjusted) price of oil per barrel, average annual price in the United
States, 1987-2005 (USEIA). It is assumed the price of a barrel in the U.S. reflects general price trends for oil as a commodity on world markets in general. There is a suggested negative relationship between OILPRR and the sales of motor vehicles in South Korea. An increase in the price of a barrel of oil gets reflected in rising prices for motor fuel which increases the cost of operating motor vehicles. An increase in the cost of motor vehicle operation is expected to depress the demand for new vehicles.
Results of the model showing promising statistical association between TOTSALES and the independent variables RGDP, UNEMPR, and OILPR are given in Table 1. The results confirm a significant statistical association exists between the dependent variable of total sales of vehicles in South Korea and the independent variables at the 95 percent confidence level.
The P values are extremely low indicating the probability of obtaining the t statistic values shown would be very low if there was no statistical significance. Furthermore, the directions of the signs on the independent variables are consistent with expectations.
Therefore, it is concluded that the hypothesis that sales of vehicles in the South Korean domestic market are dependent on macroeconomic variables including growth in the
Real Gross Domestic Product, changes in the rate of unemployment, and the price of oil is accepted. Although the model reveals strength in explaining historical demand in the South
Korean market, it should be noted that the predictive strength of the model may be weakened by both an inconclusive DurbinWatson statistic suggesting at least the possible existence of serial correlation and the existence of a relatively large standard error of the
An initial multiple regression analysis of
TOTSALES against the four independent variables was promising. Signs on all the variable were in the expected direction. The adjusted R-Squared was 0.849. However, the tstatistic on LENDRATE was low and not significant at the 95 percent confidence level.
Further analysis revealed the existence of multicolinearity between LENDRATE and
OILPRR with an R value of -.70. There were no other multicolinearity issues among the other independent variables. Therefore, subsequent analysis omitted the LENDRATE variable.
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estimate, both of which could be a function of the small number of observations.
Figure 3 shows the pattern of production and demand for vehicles in the South Korean domestic market. Production for the SKAI has been on a steady upward trend over the period covered by this study, except for the sharp decline during the Asian financial crisis of 1998.
Domestic sales of vehicles have not kept up with production with the result that the SKAI is highly dependent on its export markets. Figure 4 shows that domestic sales as a percent of production have declined from the range of 70 percent in the early 1990’s to 30 percent by
2006. The SKAI views the world market as being intensely competitive. The strong Korean won in recent years led to more sluggish growth of exports than in the 2000 to 2004 period.
Even with these potentially negative factors in the market, the export demand for South Korean vehicles is expected to remain relatively strong because of expansion of sales networks and an improved quality image for South Korean cars in the global market (KAMA, January 10, 2007).
going to be dependent on the industry expanding and strengthening its global operations in markets such as the United States.
SOUTH KOREAN AUTOMOBILE INDUSTRY
IN THE UNITED STATES MARKET
Since its entrance into the United States automobile market in 1986, the South Korean automobile industry has steadily increased its market share in the U.S. Hyundai had initial success in the U.S. by selling 168,882 units of its Excel in 1986. Kia followed in 1994, selling
12,163 vehicles in the United States, and then
Daewoo with 2,400 sales in 1998 (Ward’s Auto
World, 2007). Here we examine several variables to determine factors leading to the increased growth in sales of Korean vehicles in the U.S. Before discussing the statistical analysis, it will be instructive to explore the history of the involvement in the U.S. market of three principal South Korean automakers;
Daewoo, Kia, and Hyundai.
DAEWOO IN THE U.S. MARKET
Since 2002, domestic sales of vehicles in South
Korea have been relatively weak due to macroeconomic and cyclical factors in the country’s economy. The evidence suggests that, at least in the near term, continued output expansion for the SKAI within South Korea is
Daewoo’s initial entry into the United States market lasted only five years. Daewoo and
General Motors (GM) began a joint venture relationship in 1978 when Daewoo obtained
Shinjin Motors, which had a joint venture with
Figure 4. South Korean Domestic Automobile Sales as a Percent of Output
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General Motors. GM Did not allow Daewoo to export abroad with its own brand, nor was
Daewoo allowed to develop its own technology to design a new car or engine (Kim & Yoonseok,
2001). Therefore Daewoo decided to terminate its relationship with General Motors.
Motors Corporation announced plans to build a
$1.2 billion assembly and manufacturing plant in
West Point, Georgia which will serve as Kia’s first manufacturing plant in America. The Kia plant in Georgia is scheduled to open in 2009.
HYUNDAI IN THE U.S. MARKET
Hyundai began to target the North American market by setting up a sales subsidiary in
Canada in 1983. Two years later it developed the Hyundai Excel which was a success
(Ravenhill, 2001). Hyundai then decided to open up its first R&D center in the U.S. in 1986.
In 1988, Hyundai built its first manufacturing subsidiary in Canada for the North American market. In the early 1990’s, the North American market for Hyundai contracted and Hyundai had to look for other markets. It closed its plant in
Canada (Kim & Yoonseok, 2001).
After the Daewoo bankruptcy and GM purchase of Daewoo in 2002, GM renamed the firm GM
Daewoo. GM Daewoo began selling the
Chevrolet Aveo in the United States in 2003 with
5,677 vehicles osld. By 2005, the Chevrolet
Aveo sold 68,085 units (Ward’s Auto World,
2007).
KIA IN THE U.S. MARKET
Kia’s Sales in the United States began with the
Festiva, which was produced in conjunction with
Frod beginning in 1987. Kia attempted to establish its own dealer network in the US because it was unsatisfied with the marketing decisions of its partner,Ford, and therefore ended the partnership (Ravenhill, 2001). Kia began independent exporting to the United
Sates in 1994, with its first export car to the
U.S., the Sephia.
With sales in the U.S. growing rapidly after the late 1990s, Hyundai once again wanted production facilities in North America. Hyundai opened its first assembly and manufacturing plant in the United States on May 20, 2005, known as Hyundai Motor Manufacturing
Alabama. As of 2007 the plant was operating at
Table 1: DETERMINANTS OF DEMAND FOR SOUTH KOREAN DOMESTIC VEHICLE SALES
1987-2005
Dependent Variable:
TOTSALES = Sales of all automobiles and light trucks in the Domestic South Korean Market
Coefficient
Constant
Real Gross
Domestic Product
(RGDP)
Unemployment
Rate (UNEMPR)
Oil Prices
(OILPRR)
Std. Error
t-Statistic
p-value
337345.8
3.540719
0.373445
9.48
0.00001
-126705.1
33838.21
-3.74
0.002
-25616.75
6629.48
-3.86
0.0015
Adjusted R-Squared:
Standard Error of the Estimate:
F Statistic
32.43
Durbin-Watson Statistic
0.8397
168,183.8
(p. value = 0.000001)
1.442
After Kia was sold to Hyundai, Kia sales in the
U.S. became strong enough by 2006 that Kia
full capacity producing 300,000 vehicles per year and employing 2,700 persons. The models
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Table 2: DETERMINANTS OF DEMAND FOR SOUTH KOREAN VEHICLE SALES IN THE UNITED STATES
1987 - 2005
Dependent Variable:
TSKSUS = Total South Korean Sales in the U.S.
Coefficient
Constant
84053
2668.98
-28636
t-Statistic
p-value
21722
813
8463
3.87
3.28
-3.38
0.0015
0.0050
0.0041
68841
QA (Quality Index)
FC_GUR (Fuel Costs)
AIRNC (Interest Rates)
Std. Error
Adjusted R-Squared:
0.866
Standard Error of the Estimate: 84,0004.35 (p-value = .0001)
produced for 2007 in Alabama were the Hyundai
Sonata and the Santa Fe (KAMA).
However in the United States market
South Korean vehicles are viewed as relatively fuel efficient compared with other vehicles. Since the mid 1980’s, both Kia and Hyundai have consistently exceeded the U.S. Corporate Average
Fuel Economy performance of Chrysler,
Ford, and General Motors (Ward’s 2006,
84). With rising gasoline prices, U.S. consumers are more likely to purchase a vehicle that has higher fuel efficiency.
Therefore, the expected relationship between U.S. fuel prices and sales of
South Korean vehicles in the U.S. is positive. -Quality Average or QA; the expectation is that a rise in the Quality Average will in turn raise sales of the South Korean vehicles in the United States, yielding a positive relationship between QA and
TSKSUS.
The quality index is taken from annual automotive issues of Consumer Reports magazine. It is measured given a quality number of 1-5; one being the worst, and 5 being the best with 3 considered average. The quality ratings for all South Korean cars rated by
Consumer Reports are averaged for each year.
The assumption is made that a higher quality vehicle is more desirable than a low-quality vehicle. The predicted direction of the relationship is positive with increased quality leading to increased sales.
MODEL OF DEMAND FOR SOUTH KOREAN
VEHICLES IN THE U.S. MARKET
The analysis of demand examines several variables that are suggested to affect the South
Korean vehicle sales in the U.S. market in the
1987 to 2005 period for which consistent data series used in the model were available. The dependent variable in this multiple regression is the Total South Korean Automobile Sales in the
United States (TSKSUS). The independent variables and predictions relative to TSKSUS are as follows;
- Real Per capita disposable income
(PCDPI) is measured in thousands of dollars. The expectation is that the more disposable income consumers have, the more they will consider buying a vehicle, so an increase in disposable income is expected to lead to an increase in sales of vehicles, therefore yielding positive relationship with the dependent variable (Data from ERP,
2007).
Fuel costs in Cents per Gallon of unleaded gasoline (FCGUR) is also an important variable. Earlier it was shown in the model of the South Korean automobile market that fuel price changes have a negative effect on vehicle sales. That is, higher fuel prices in South Korea raise the cost of operating a vehicle and depress sales.
Average Interest Rate per New Car or AIRNC; the expectation is that a rise of interest rates for
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new cars will raise the effective price of and have a negative effect on the sales of South
Korean Vehicles in the
-
-
restructuring and consolidation has resulted in the Hyundai-Kia combination and a resurgent
GM Daewoo combination emerging as dominant producers in Korea that are better able to exploit economies of scale and respond to growing demand in domestic and global markets.
United States. Therefore, an inverse relationship between AIRNC and the dependent variable (WMVFF) is expected. Because of the existence of multicolinearity between Per Capita
Disposable Income (PCDI) and Average
Interest Rate per New Car (AIRPNC), (r
= -.91), the PCDI variable was dropped from the model.
In the domestic South Korean market, consistent with the expectation of the literature on that market, Real Gross Domestic Product was found to have a positive association with the demand for vehicles while the unemployment rate and price of oil per barrel were found to have a negative association with the dependent variable. RESULTS AND EXPLANATIONS
In the United States market, the demand for
South Korean vehicles in the 1987-2005 period was found to be positively associated with the quality rating of those vehicles and the price per gallon of regular gasoline. The interest rate for new loans was found to have a negative association with the demand for South Korean vehicles in the United States.
The results suggest that demand for vehicles in
South Korea will be highly dependent on macro economic variables associated with the development of the South Korean economy. In the United States market, the South Korean manufacturers will be faced with the challenge of having to maintain the momentum of the past decade. There is evidence that will be a major challenge: The adjusted R-Square in this equation is .866 indicating that 86.6 percent of the variation in the sales of South Korean vehicles in the United
States is associated with independent variables.
According to the T statistics in the table, all of the variables are significant at the 5 percent level. Results of the model showing the statistical association between TSKSUS and the independent variables QA, FCGUR, and AIRNC are given in Table 2. The results confirm the expectations of the hypotheses that a significant statistical association exists between the dependent variable of sales of South Korean automobiles in the U.S. and the independent variables at the 95 percent confidence level.
The low p values indicate the probability of obtaining the t statistic values shown would be very low if there were no statistical significance.
In recent years, both Hyundai and Kia sales in the United States have been increasing, but at a decreasing rate. This is evident through the average annual rate of growth in sales between the years of 1995 and 2006. From 1995 to
2000, the average annual rate of growth for
Hyundai was 17.878% and 45.37% for Kia. In the following five years, from 2000 to 2005, the rate of sales increase declined for both automakers. Hyundai’s average annual rate of growth fell to 13.24% and Kia’s average fell to
11.43%. Between 2005 and 2006 the annual rate of growth for these South Korean automakers in the United States Market was
2.594%, brought down primarily due to
Hyundai’s average growth being less than 1%.
The relatively low Durbin-Watson Statistic does raise at least the possibility of a serial correlation bias in the data which could be due to the small number of observations and which future research might explore. Likewise, while demonstrating significant association between
South Korean auto sales in the U.S. and several variables in the past, the predictive value of the model may be weakened due to the relatively large standard error of the estimate.
CONCLUSION
The question raised in this study was; “what are the factors that have lead to the expansion of domestic demand and United States demand for
South Korean vehicles?” In answering that question, we find that the South Korean automobile industry underwent significant restructuring in the decade of the 1990’s. That
There are several reasons for these variations in growth percentage and low sales growth. For one, saturation of the market may be an issue in the United States. Also, both manufacturers need to maintain (or improve) quality and
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customer service. A third suggestion is that the appreciated value of the Won has weakened the profitability of vehicles, resulting in less revenue for the corporations if prices are maintained, or if prices are increased, risking a loss of the lowprice niche for South Korean vehicles in the U.S. and possibly a loss of sales.
Korean vehicle market will test the ability of the
South Korean vehicle builders to maintain production growth. The macroeconomic independent variables are significant through the years of our study, but may not hold in the future years due to South Korea’s changing economy.
The progress of the South Korean automobile industry in both the U.S. and domestic Korean markets is likely to provide fertile ground for future research and analysis.
The South Korean carmakers have a challenge to maintain growth in the U.S. market. At the same time, a weak or stagnant domestic South
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Copyright © 2007 Robert R. Ebert, Mariel Montoney and BaldwinWallace College
22
The Baldwin-Wallace College Journal of Research and Creative Studies, Fall 2007, 1(1):12-24
Appendix:
Table A-1: South Korean Macroeconomic Data and Auto Production and Sales
Lending Rate
Industrial
Share
Prices
Wages:
Monthly
Earnings
Unemployment
Rate
Gross
National
Income
(GNI)
(Percent)
(Index
2000=100)
SHAREPR
(Index
2000=100)
WAGES
(Percent)
Billions of won GNI
LENDRATE
UNEMPR
1987
10.000
57.034
21.0
1988
10.125
94.675
25.1
1989
11.250
125.472
31.4
1990
10.000
102.035
37.7
1991
10.000
89.759
44.0
1992
10.000
80.200
50.9
1993
8.583
100.215
62.2
1994
8.500
132.192
70.1
1995
9.000
125.794
78.0
1996
8.840
113.586
87.2
1997
11.8767
89.181
93.4
1998
15.279
55.808
91.0
1999
9.396
109.493
92.1
2000
8.545
100.000
100.0
2001
7.708
78.270
105.8
2002
6.769
103.471
118.5
2003
6.237
92.884
128.7
2004
5.904
113.869
140.9
2005
5.593
146.339
152.3
Source: International Monetary Fund, International Financial Statistics and KAM
23
3.100
2.500
2.600
2.400
2.300
2.400
2.792
2.400
2.020
2.000
2.590
6.840
6.280
4.430
4.020
3.280
3.570
3.680
3.700
109588.
131061.
147770.
178628.
216303.
245388.
290088.
339343.
397459.
446856.
488457.
476245.
523355.
576160.
621028.
685069.
725420.
781174.
805886.
GDP
Volume
(2000=100)
Unit Sales of Vehicles
GDPVOL
42.989
47.564
50.772
55.420
60.626
64.188
68.125
73.941
80.720
86.370
90.387
84.191
92.178
100.000
103.837
111.074
114.515
119.931
124.682
DOMSALES
249,448
323,561
514,484
626,126
772,548
876,262
1,037,488
1,140,399
1,149,409
1,238,940
1,151,287
568,063
910,725
1,057,620
1,065,161
1,225,210
1,001,874
857,977
913,550
The Baldwin-Wallace College Journal of Research and Creative Studies, Fall 2007, 1(1):12-24
Table A-2: South Korean Vehicle Sales in the United States Independent Variable Data
U.S. Dollars
Total South
Korean Vehicle
Sales in the U.S.
Per Capita
Disposable
Personal
Income
Index number
(1-5)
Quality
Average
Index Number
Percent
Fuel
Cents/Gallon
Unleaded
Regular
Average Interest
Rate per New
Car
TSKSUS
PCDPI
QA
FCGUR
AIRNC
1987
263610
14241
3.0
94.8
10.7
1988
264282
15297
3.0
94.6
12.6
1989
183261
16257
1.5
102.1
12.7
1990
137448
17131
1.5
116.4
12.6
1991
117630
17609
1.3
114
12.4
1992
108549
18494
1.0
112.7
9.8
1993
109488
18872
1.0
110.8
9.5
1994
138258
19555
1.0
111.2
9.8
1995
132118
20287
1.0
114.7
11.2
1996
144742
21091
1.0
123.1
9.8
1997
168511
21940
1.0
120
7.1
1998
175510
23161
1.0
105.9
6.3
1999
329571
23968
1.0
116.5
6.7
2000
473357
25472
1.0
138.2
6.6
2001
618258
26236
1.5
146.1
5.7
2002
633861
27165
3.7
135.8
4.3
2003
637692
28065
3.6
159.1
3.4
2004
688670
29475
3.1
188
4.4
2005
730863
30429
3.0
229.5
5.8
Sources: Ward's Motor Vehicle Facts & Figures 2006, 1996, 1992, Economic Report of the President 2006
24 