South Korea’s Hyundai, Kia sales halve in China amid diplomatic spat over THAAD
The carmaker becomes the latest South Korean exporter to fall victim to a boycott sparked by Beijing’s outrage over the missile defence system
Carmaker Hyundai has become the latest Asian multinational to fall prey to China’s government-orchestrated boycott of South Korean goods in retaliation for the planned installation of a US missile defence system on its soil.
March sales of Hyundai and its sister brand Kia Motors in China plunged a staggering 52 per cent from a year earlier to 72,000 vehicles, the lowest level since 2014, against the backdrop of soaring anti-Korean consumer sentiment in the world’s largest car market, according to industry statistics.
China’s shunning of the automotive behemoth follows a nationwide revolt against South Korean confectionary-to-mall conglomerate Lotte Group, which has already resulted in the closure of 75 out of 99 Lotte supermarkets in the country in just a few weeks.
“The falling shipments suggest dealers and distributors were swift to factor in their bearish views on Hyundai car sales in China for the coming months,”said Alexious Lee, head of industry research, China, with CLSA.
“We believe that downward spiral may sustain into the next few months, though it’s likely to get milder.”
Initially spearheaded by mainland state media and later spreading to consumers and the business community, the boycott campaign came in the wake of Lotte’s agreement in early March to supply land to host the US missile shield, known as THAAD (Terminal High Altitude Area Defense).
Designed to protect South Korea from potential strikes by the nuclear-armed North – the two Koreas are still technically at war – THAAD’s far-reaching radar is viewed by Beijing as a grave threat which could expose China’s military secrets to Seoul and its ally, the US.
Weapons recently deployed by a furious China range from protests and travel bans to cyber attacks and unannounced inspections of Korean stores. With its China-based retail business virtually stalled, Lotte had to resort to steep discounts in its Korean duty free stores to boost sales, according to local media reports.
China is the Hyundai’s largest market where its flagship sedans, the Elantra, Sonata and Sportage SUV are popular among young buyers thanks to their modern designs and affordable prices. Last year, the carmaker shipped 1.1 million vehicles, manufactured with local partner BAIC Motor, to Chinese consumers, up 11 per cent from 2015.
Photos of a Hyundai vehicle seemingly vandalised by an angry mob went viral on Chinese social media last month. That triggered memories among pundits of the same fate befalling Nissan, Toyota and Honda back in 2012, when Japan attracted China’s ire amid rival sovereignty claims over the Diaoyu islands, also known as the Senkakus, between Beijing and Tokyo. The anti-Japan rampage years ago caused millions of yuan in damaged property and left at least one Chinese consumer seriously injured.
“We have seen a recent drop in dealership traffic in China as consumer sentiment towards Korean products overall is low and competitors are initiating special promotions targeting our customers,” Hyundai and Kia said in a joint statement.
Both Hyundai and Kia cut their output at their Chinese plants last month, Korea’s semi-official Yonhap news agency reported.
Adding to pressure on the Korean car giants is the rapid rise of their Chinese rivals aided by technology breakthroughs, analysts said.
“Chinese carmakers such as Great Wall Motors and Geely have been seizing market share of Hyundai and Kia, partly because the Chinese players carried out a series of upgrades to their models,”said Lee.
2016 was a boom year for home-grown car brands in China, with industry leaders like Geely and Great Wall seeing their net profits surge more than 30 per cent.