Japanese car sales to South Korea slump amid trade spat

SEOUL • Car sales by Japanese automakers in South Korea slumped 32 per cent last month from the prior month, after a trade spat between the countries turned increasingly acrimonious.

Honda Motor's vehicle registrations dropped 42 per cent, while Toyota Motor saw a decline of 38 per cent, according to data from the Korea Automobile Importers & Distributors Association (Kaida). Even so, Japanese car sales from January through last month were up 6.7 per cent from a year earlier.

Consumers in South Korea have boycotted some Japanese travel and consumer products in response to Prime Minister Shinzo Abe's restrictions on sales to South Korea of materials for high-tech components.

A drop in car sales suggests South Koreans are becoming increasingly willing to halt spending on big-ticket items because of the spat.

Kaida vice-chairman Yoon Dae-sung said the beginning of the holiday season and "decline of some brands" weighed on an increase in volumes and introduction of new cars. He did not single out any manufacturers or countries of origin.

IHS Markit analyst Yoshiaki Kawano said: "We cannot ignore the consequences of political issues between Japan and Korea that might lead to the sales downturn in Korea." He added that the market in South Korea has not been doing well due to the sluggish economy, which has hurt sales of domestic vehicles and imports despite government efforts to reduce taxes on vehicles.

Total imported car sales in South Korea rose 0.3 per cent last month from the prior month. Mercedes-Benz sales rose 11 per cent in the period, while BMW gained 14 per cent. South Korea is Japan's third-largest export market, worth 5.79 trillion yen (S$75.5 billion) in trade last year."

Toyota spokesman Kayo Doi said: "Various market factors have an influence on sales, and it can't be said completely that the recent Japan-Korea relationship is the main reason for the decline in sales."

A Honda representative did not immediately respond to a request for comment.

Last week, Japan removed its trading partner from a list of trusted export destinations, and said the measure will take effect on Aug 28. South Korea fired back by saying it would take Japan off its easy-trade list.

The latest flare-up between the countries happened after South Korean courts seized assets of Japanese firms they held liable for cases of forced labour during the 1910-1945 period of colonisation. Although Mr Abe has denied that the export controls are retaliation, the spat has fanned nationalistic sentiments in both countries.

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A version of this article appeared in the print edition of The Straits Times on August 06, 2019, with the headline 'Japanese car sales to S. Korea slump amid trade spat'. Print Edition | Subscribe