Hyundai cuts, Kia lifts domestic sales target

SEOUL (Reuters) - Hyundai Motor Co 005480.KS, South Korea's top auto maker, said on Sunday it had cut its local sales target for this year by 6 percent as record-breaking oil prices are hitting consumer sentiment in Asia's fourth-largest economy.

But its affiliate Kia Motors Corp (000270.KS) and the country's No.2 car maker said it had raised its domestic sales target by 11 percent, helped by the popularity of its fuel-efficient mini-car and new model launches.

Hyundai, which controls about half of the South Korea's car market, said in a statement that it aimed to sell 630,000 vehicles in the higher-margin domestic market, compared to its previous target of 670,000 units.

The maker of Sonata sedan and the Santa Fe sport utility vehicle (SUV) sold a revised 625,275 vehicles last year in South Korea.

"We lowered the local sales target as the outlook is not that bright. South Korea's auto companies have been hit by weaker consumer sentiment because of surging oil prices," a Hyundai official told Reuters by telephone.

In June, domestic sales of South Korea's five auto makers fell 7.5 percent from a year earlier as higher oil prices and weaker consumer sentiment hit demand for new models, especially SUVs, Korea Automobile Manufacturers Association data showed.

Hyundai's domestic sales dropped 14.6 percent from a year ago last month, although its sales for the whole of the first half rose 4.8 percent to 318,756 units, according to the company.

Local sales of Hyundai and other South Korean auto makers are expected to remain sluggish in coming months as fuel prices are likely to rise further, analysts said.

An economic slowdown and higher inflation are also expected to weigh on demand.

South Korea's annual inflation in June jumped to its highest in almost a decade, denting consumers' disposable incomes, and the central bank forecast the slowest economic growth since 2005 due to soaring commodity prices.

"We are worried about a weaker economic growth and sluggish local consumption because of higher oil and commodity prices," Kim Dong-jin, Hyundai's vice chairman said in a statement.

Shares in Hyundai, the world's No.5 auto maker along with Kia, fell about 14 percent since June.

Global auto makers have been hit by soaring prices of oil and raw materials, slower U.S. economy and global inflation.

However, Kia raised its domestic sales target to 364,000 units in 2008 from the previous 327,000, fuelled by strong sales of its Morning mini-car.

Last year, Kia sold 271,809 vehicles at home.

"Soaring oil prices have helped sales of the Morning and we plan to launch the Forte small sedan in August, expected to attract more customers amid higher oil prices," a Kia official told Reuters by telephone.