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Car makers belt up for onslaught from Asia
Currency devaluations could spark a South-East Asian export surge, writes DON ROBERTSON
Industry sources say the devaluation of the Korean currency by almost half in only two months could lead manufacturers such as Hyundai, Daewoo and SsangYong to reduce prices by as much as 10% in an effort to boost export sales. Prices of Korean cars have already been reduced in Australia and it is feared that dumping could become a reality, although regions such as the US and Europe would oppose this. But Renato Ruggiero, director-general of the World Trade Organisation, warned in London on Friday that South-East Asian countries should not be shut out of world markets, despite protectionist temptations which may arise. Ruggiero said exports from South-East Asia could rise significantly due to currency devaluations and the need to finance external debt. The region's imports should shrink because of reduced buying power and slower economic growth. At the beginning of October, the South Korean currency, the won, was quoted at 180 to the rand. By mid-December it had tumbled to 370. Hyundai was recently reported as saying it expected to lose about 50% of its home market. It is expected that strong efforts will be made to maintain reasonable production levels by boosting exports. Johan van Zyl, Toyota's MD for vehicle marketing, says it is to be expected that South Korea will push its export drive this year and sales could reach record levels. He believes, however, that the region's economic problems will continue and without funds for research and development, sales will suffer in later years. Brand Pretorius, CE at McCarthy Motor Holdings, says South Korea will make additional efforts to boost exports. He concedes that the weak currency will make imports into South Korea more expensive, since imports are paid for in dollars, but cites the example at Daewoo, where the workforce has accepted a 30% salary cut, sharply reducing production costs. He says imports from Korea, mainly Daewoo and Hyundai, could increase to about 15% of the total SA car market this year from 12.5% last year. Hyundai cars have been assembled in a semi-knocked down (SKD) state in Gaberone in Botswana by Hyundai Motor Distributors for two years. Hyundai will begin production of its vehicles in SA with a local component content in April. The new plant cost about R250-million and provision will have to be made for amortisation, while duties to be paid on the imported completely knocked down kits, will be much higher than those on SKD vehicles. "These factors should ensure that current prices must, at least, be held," says Pretorius. "The Koreans are coming, but they won't take the market. The locals will defend themselves. The Koreans don't have sufficient credit, the capacity to import, or the number of dealer outlets to make much of an impact," says Pretorius. Some local manufacturers believe that, instead, an export drive is likely from Japan, where the vehicle market has dwindled and the currency is weak.
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