South Korea's Hyundai Motor Co and Kia Motors Corp have sharply cut vehicle production in China, according to sources, as anti-Korean sentiment and competition from Chinese brands play havoc on sales and threaten earnings. Sonia Legg reports.
South Korea's car makers are facing stiff competition from China and the United States. Their mainstay sedans have been losing market share to SUVs. But that's not their only problem. A Chinese backlash over the deployment of a U.S. missile defence system outside Seoul is also having a big impact. (SOUNDBITE) (English): SIMON FRENCH, CHIEF ECONOMIST, PANMURE GORDON, SAYING: "It is an absolutely essential market for South Korean industry, not just its car makers, and of course the geopolitics that are currently in play, particularly with the role of South Korea supporting potential U.S. intervention in North Korea, and where China sits in the regional political dynamics is front and centre." Reuters sources say Hyundai and its affiliate Kia Motors have sharply cut vehicle production in China. Their combined China sales for March were said to be less than half what they were a year earlier, putting earnings under threat South Korea's Lotte Group has also felt the impact of boycott calls and protests in China, its biggest overseas market. Dozens of its stores have been closed following inspections by Chinese authorities. The reaction linked to its decision to provide land for the missile defence system. (SOUNDBITE) (Korean): HWANG KAG-GYU, HEAD OF LOTTE CORPORATE INNOVATION OFFICE, SAYING: "Hotel Lotte's key duty-free business has been considerably affected by China's reaction. We believe the initial public offering of Hotel Lotte won't be possible until the business recovers." South Korea's businesses know that could take time. In 2012, the backlash over a territorial dispute between Japan and China lasted a year, forcing Japanese car makers to slash production.