Sales of Japanese cars in SKorea slumps

Hyunjoo Jin

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

Industry data out of South Korea on Monday showed Toyota Motor sales in the country tumbled 32 per cent from a year earlier while Honda's sales skidded 34 per cent.

Although automakers are still assessing the main factors driving the declines last month, 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 labourers and sparking a boycott by South Korean consumers of Japanese products and services, from cars, beer and pens to tours.

On Friday, 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.

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 a Japanese car in Korea," Daelim University College automotive engineering Professor Kim Pil-so said.

The data from the Korea Automobile Importers & Distributors Association (KAIDA) also showed Lexus, Toyota's luxury badge and the third-most imported brand into South Korea after Mercedes and BMW, saw sales down 25 per cent from the previous month, although they were still up 33 per cent 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 firms to compensate wartime forced labourers, a matter Tokyo says was settled by a 1965 treaty normalising bilateral ties.

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