As of the end of May, South Korea’s trade deficit with China in the automotive industry stood at US$2 million. This, according to the Korea Institute for Industrial Economics & Trade, is the first auto trade deficit that South Korea has with the neighbouring country.

A surplus was seen last year, although the amount was a decrease from US$1.7 billion in 2014 to US$870 million in 2015.

South Korean automakers including Hyundai Motor, Kia Motors, GM Korea, Ssangyong Motors and Renault Samsung shipped a total of 1,231 units to China for the first five months of this year, a 94.8 percent drop year-on-year. The country’s automakers’ growing production capacity in China is the biggest reason behind the deficit. Shipment volume to China rapidly decreased since last year when the nation’s largest automakers Hyundai Motor and Kia Motors secured the production capacity of 2.1 million units in China.

Hyundai and Kia currently produce their key vehicles such as mid-size sedans and sport-utility vehicles in China, exporting only large-size cars and multi-vehicle vehicles from South Korea.

The reason for the trade deficit is also due to the increasing competitiveness of Chinese automakers, who are expanding facilities and focusing on research and development. The Chinese market share for the automotive industry rose to 41 percent in 2015, up from 38 percent the previous year.

APMEN Sept 2016, News