June 1, 2012 / 7:43 AM / 5 years ago

CORRECTED-UPDATE 1-Korean, Japanese automakers post solid May sales

5 Min Read

* Hyundai global sales up 8 pct last month; Kia up 21 pct

* U.S. recovery helps South Korean auto exports

* Japanese automakers ride surge in sales at home

By Hyunjoo Jin and Chang-Ran Kim

SEOUL/TOKYO, June 1 (Reuters) - Automakers in Japan and South Korea continued to post solid gains in sales in May with Hyundai Motor and Kia Motors benefiting from the sustained recovery of the U.S. market while Japanese domestic sales were supported by government incentives for fuel-efficient models.

Auto sales are among the earliest indicators of demand in global economies and U.S. auto sales have proven to be a bright spot while negative headlines from euro zone countries dims the outlook there.

Hyundai's global sales rose 8 percent and Kia's sales jumped 21 percent in May from a year earlier, driven mainly by overseas sales.

Hyundai and Kia have gained market share in the United States, Europe and other key markets since the global financial crisis by offering stylish cars at competitive prices. They have also been helped by the cheaper South Korean currency and South Korea's free trade deals with Europe and the United States.

South Korea's exports of automobiles, which also include Europe-bound Chevrolet cars made by General Motors' South Korean unit, rose 4 percent in value terms in May from a year earlier, thanks to the recovery of the U.S. market, according to government data released on Friday. In contrast, overall exports dipped 0.4 percent in Asia's fourth-biggest economy last month.

Shares in Hyundai closed down 2.5 percent and Kia shares dropped 1 percent in a wider market that fell 0.5 percent following disappointing Chinese factory activity data released on Friday.

China's factory activity data fell more than expected in May to its weakest reading this year, highlighting concerns the worsening euro zone debt crisis will further undermine global economic growth.

Japan Fights Back

In Japan, car sales soared 66 percent in May to 394,950 vehicles, rebounding from a trough in the months following the earthquake and tsunami a year earlier when carmakers slashed production due to a disruption in the supply chain.

Demand for new vehicles has also been supported by the government's subsidies on fuel-efficient cars, designed to keep domestic factories humming as the strong yen forces automakers to reduce loss-making exports.

Excluding 660cc minivehicles - a segment unique to Japan - sales of new cars, trucks and buses also rose by two-thirds, driven by hybrids such as Toyota Motor Corp's Prius and Honda Motor Co's gasoline-electric Fit.

That marked the biggest rise on record for the month of May, but an official at the Japan Automobile Dealers Association said there was little room for optimism.

"The sales volume itself was low and only barely exceeded the tally from two years ago," said Michiro Saito, a manager at the dealer association. "We can't call this a real recovery and the outlook is uncertain."

Non-mini vehicle sales totaled 236,366 in May, compared with 228,514 vehicles two years ago. Toyota's sales more than doubled, while Honda's grew 48 percent. Nissan Motor Co , which recovered its supply chain faster last year, posted a 17 percent rise in non-minivehicle sales.

Without the help of government tax incentives, the Japanese car market has been trending downwards due to urbanisation, a declining population and the loss of interest in owning cars among young people.

Threats to Hyundai, Kia

The revival of Japanese rivals and limited production capacity of South Korean carmakers threaten to slow the growth of Hyundai and Kia.

Industry research firm TrueCar.com expects U.S. light vehicle sales to be up 32 percent in May to the highest level in five years, helped by pent-up demand and as the Japanese automakers bounce back from last year's earthquake-related vehicle shortages.

Hyundai and Kia, which rank fifth in global car sales, and U.S. carmakers General Motors and Ford, lost market share in May in the U.S. market as Toyota and Honda were set to post U.S. market share gains, according to TrueCar.com.

"The U.S. market is recovering fast, but Hyundai, Kia are falling short of catching up with market demand, although they are running plants at full capacity," Dongbu Securities analyst Yim Eun-young said.

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