Hyundai sees headwinds from weaker yen
SEOUL: South Korean automakers face a major headwind from a weakening Japanese yen, which will boost rivals like Toyota Motor Corp next year, a Hyundai Motor think tank said.
The fall in the yen would intensify competition in major markets, such as China and the United States, where overall demand is expected to shrink in 2018, the think tank said.
It projected that the South Korean won would fetch 978 per 100 yen next year, compared with 1,018 this year.
The re-election in November of Japan’s Prime Minister Shinzo Abe, who favoured 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 they are 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.
“The weaker yen is expected to be the biggest challenge for South Korean automakers next year, as they are competing against Japanese,” Lee said.
He said the price gap between South 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 United States in 2011 and the gap is only 2% this year, he said.
A weaker yen and higher profit had also allowed Japanese carmakers 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 (SUVs) and a diplomatic row with Beijing that hit South Korean-made products. Hyundai Motor said last Friday it planned to roll out three SUVs next year in the United States – the redesigned Santa Fe, the Kona, and the tweaked Tucson, to revive its sales momentum.
In China next year, Hyundai and Kia plan to release three Chinatargeted small SUVs next year. — Reuters