S. Korea’s small-size car sales soar amid weakening economic conditions

Sales volume of small-size cars gained at a rapid pace in South Korea thanks to diverse incentives for purchasing small-size cars as economic conditions worsened further. A total of 124,450 small-size cars were sold this year as of July, up approximately 15 percent from a year earlier. The sales figure is the highest level since 1992 when the nation’s first small-size car Daewoo Tico was launched. Such steep growth in small-size car sales is in sharp contrast with five Korean carmakers’ sluggish sales performance, which contracted 5.7 percent during the cited period. The rise in small-size car sales is even more astonishing as small-size car sales over the past seven months are nearing the annual small-size car sales for the whole year of 2011 (185,130 cars), according to sources in the industry. Small-size car sales surged due in part to Kia’s expansion of its compact car lineup. Only two compact cars, Kia’s Morning and GM Korea’s Spark, were sold in the local small-size car market before Kia added the Ray, a box-type car model, to its small-size car lineup. Although the Ray’s engine displacement stands at only 1,000 cc, it boasts larger boot space than other small-size cars thanks to its box-shaped figure. Kia’s Ray and the Morning share the same target market as they fall in the same automobile segment, the small-size car category, and the similar price range. Consequently, increased sales of the Ray resulted in a slump in sales of the Morning. Sales volume of the Morning contracted approximately 20 percent this year as of July, whereas the sales volume of the Ray logged 30,300 units as of July. In total, Kia’s compact car sales still climbed 21 percent from a year earlier. Sales of the Chevrolet Spark made by GM Korea grew at a slow clip, but still jumped 3.5 percent to 38,491 units. Compact cars are forecast to enjoy growing popularity for a while. “Above all, small-size cars are cheaper, and those who purchase compact cars are exempted from paying registration and acquisition taxes, which amount to seven percent of the price of a car in aggregate,” a Kia Motors official said. “Small-size cars also have their strengths in lower maintenance expenses and better gas mileage. In addition, small-size car owners benefit from diverse incentives including discounts in toll fees and parking fees at public parking lots. Such incentives make small-size cars particularly popular among consumers in the face of worsening economic conditions.”