Hyundai and affiliate Kia sales in China dropped 52.2 percent on-year to 72,032 cars.
Hyundai and affiliate Kia said Tuesday that their sales in China plummeted 52.2 percent on-year to 72,032 cars. The dismal performance seems to be due to an unofficial boycott over Korea's decision to deploy a Terminal High-Altitude Area Defense battery from the U.S. here.
The two carmakers' factories were hit hard by the poor sales. Hyundai stopped the night shift at its plant in Beijing, while production lines in Hebei and Cangzhou sat idle for 12 days from March 24.
Kia's plant in Jiangsu Province idled assembly lines in rotation for one week each last month, rolling out only 30 percent of its output capacity after orders fell almost 70 percent. A Kia staffer said, "At this rate, additional production lines could be forced to stop."
Hyundai has not decided when to start output at its new plant in Chongqing, which was slated to begin in the second half of this year.
There are concerns that the sharp decline may just be starting. In 2012, when Beijing and Tokyo were engaged in a territorial spat over the Senkaku or Diaoyu islands, Japanese automakers' sales in China plunged almost 70 percent.
Already in February, Hyundai and Kia's sales in China fell to 91,222 vehicles. In March Hyundai's sales were down 44.3 percent and Kia's 68 percent.
"A boycott of Korean products has been spreading in China since the Korean government announced the site for the THAAD deployment in late February," a Hyundai staffer said. "Orders began decreasing visibly in March and even pre-orders are being canceled."
Chinese automakers are using the opportunity to bolster their own sales. One is offering free gifts to motorists who buy its cars after canceling orders for Korean vehicles, while another has put up banners publicizing its opposition to Korean-made products.
Hyundai and Kia are in emergency mode because China is their biggest market, accounting for 23 percent of total sales. The two are lowering their combined sales target in China this year from 1.95 million vehicles.
But their sales have been declining gradually over the last three to four years. As of February, they accounted for just 5.7 percent of the Chinese car market, down from 10 percent in 2014. Making matters worse, sales in the U.S., their second-biggest market, also dropped 11 percent last month.
Lee Hang-koo at the Korea Institute for Industrial Economics and Trade said, "Businesses have no control over the THAAD issue, but they need to come up with steps to overcome the crisis, including launching more competitive products and charitable projects to regain consumer confidence."
Hyundai and Kia plan to roll out six new models in China this year and bolster marketing, including cash rebates.
"Overall overseas sales fell because we suffered a double-digit slump in China last month," they said in a press release on Monday. "We have trouble doing business in the country because of the boycott" over Korea's decision to deploy a Terminal Higj-Altitude Area Defense battery from the U.S.
Separate March sales data for China have not yet been released.
At home, Hyundai's revenues rose 2.6 percent thanks to brisk sales of the new Grandeur and Sonata, but overall sales declined 6.3 percent due to lower demand from overseas markets. But Kia's domestic sales dropped 5.7 percent as well, resulting in a 11.2 percent decline in overall sales on-year, largely due to lack of new models.
The combined domestic sales of Korea's five carmakers fell two percent on-year to 145,903 cars. GM Korea's revenues plummeted 12.4 percent as sales of its flagship Spark dropped by half.
Ssangyong's domestic sales grew 1.8 percent thanks to the Tivoli compact SUV, and Renault Samsung's 2.7 percent due to increased sales of flagship models including the SM6.
Meanwhile, Hyundai's forthcoming SUV will be named the "Kona," the carmaker said Monday.
Set to be launched in June, the Kona is Hyundai's first compact SUV for the domestic market.
Hyundai has released similar compact SUVs including the Creta, also known as the ix25, in overseas markets such as Brazil, India and Russia, but was reluctant to release such models here, believing demand was insufficient.
With the release of the Kona, Hyundai will offer a varied lineup of SUVs including small, midsize and large models.
A Hyundai showroom in Beijing is deserted on Monday.
Hyundai's new SUV 'Kona'