A model poses next to a Toyota vehicle during the 2017 Seoul Motor Show held in Gyeonggi Province, South Korea. Photo: IC

 

  

Sales of Japanese-branded autos in South Korea slumped in July amid a worsening diplomatic row that has led to consumer boycotts and efforts by Seoul to cut the economy's reliance on imports from Japan.

Toyota Motor's sales in South Korea tumbled 32 percent from a year earlier while Honda's sales skidded 34 percent, industry data out of South Korea showed on Monday.

Although automakers are still assessing the main factors driving the declines, industry participants and analysts expect an intensifying boycott campaign to hurt demand further, as diplomatic tensions grow.

Japan tightened controls in July on exports to South Korea, escalating a row over wartime forced laborers and sparking a boycott by South Korean consumers of Japanese products and services, from cars, beer and pens to tours.

On August 2, Japan escalated tensions by removing South Korea from a list of export destinations approved for fast-track status.

"Showroom visits are declining while consumers are holding off on signing contracts," a Honda Korea official told Reuters, asking not to be identified because of the sensitivity of the matter.

South Korean representatives for Honda and Toyota did not provide any commentary on the sales trends and said they would need to assess the reasons for the decline.

However, industry watchers said public sentiment was a factor behind the sharp falls.

"The South Korean public is angry about Japan… It will soon become a taboo to drive Japanese cars in Korea," said Kim Pil-soo, an automotive engineering professor at Daelim University College.

Figures from the Korea Automobile Importers & Distributors Association (KAIDA) also showed sales by Lexus, Toyota's luxury line and the third-most imported brand into South Korea after Mercedes and BMW, down 25 percent from the previous month, although they were still up 33 percent from the previous year.

Japanese officials have cited unspecified security reasons for the export curbs to South Korea. 

But they have also pointed to an erosion of trust after South Korean court rulings last year ordered Japanese companies to compensate wartime forced laborers, a matter Tokyo has said was settled by a 1965 treaty normalizing bilateral ties.

The South Korean auto industry has been affected as well, tracking broader moves in Asia as the China-US trade war intensified but also weighed by uncertainty over the diplomatic dispute between Seoul and Tokyo.

Self-sufficient

On Monday, South Korea's government announced plans to invest about 7.8 trillion won ($6.48 billion) in research and development for local materials, parts and equipment over the next seven years to help cut reliance on Japanese imports.

South Korea plans to improve economic self-sufficiency in regard to the production of 100 key components, materials and equipment items used to make chips, displays, batteries, automobiles and other products. The government aims to stabilize supply of these items over the next five years.

South Korean President Moon Jae-in, who promotes rapprochement with the nuclear-armed North Korea, said that inter-Korean economic cooperation would allow South Korea to overcome Japan's lead. 

"Japan can never prevent our economy from making a leap forward," he said at a weekly meeting with senior presidential aides, adding that Japan will be a "catalyst" for South Korea's resolve to become an economic powerhouse.

While foreign-branded cars make up a small portion of vehicle sales in South Korea, the business community is concerned a consumer swing away from Japanese imports for political reasons could grow in other sectors, such as tourism and retail.

South Korea's Foreign Ministry on Monday began to send out travel advisory alert texts to South Koreans traveling to Japan, a ministry official told Reuters.

"The South Korean government has been closely monitoring the possibility of anti-Korean protests run by Japanese conservative groups, and we advise South Koreans visiting Japan to refrain from visiting anti-Korean protest sites and to be mindful of personal safety through safety text messages," said the official.

Japan's Fast Retailing fashion brand Uniqlo has been a prime target for the boycott, with its 186 stores in South Korea making the country its second-biggest overseas market in terms of outlets.

Fast Retailing Chief Financial Officer Takeshi Okazaki has acknowledged there had been some impact on its sales as a result of the campaign, without elaborating.

Japan's Asahi Group Holdings said the boycott had hit its sales of beer, which is popular in South Korea, as it lowered its profit guidance slightly.


Newspaper headline: Japanese car sales hit bump in SK