Carmakers offer discounts to reduce stock

By Choi Kyong-ae

Carmakers are offering steep discounts to reduce their inventories because the government’s temporary individual consumption tax cuts end this month, the Korea Automobile Manufacturers Association (KAMA) said Sunday.

“Automakers, domestic and multinational, have embarked on an aggressive promotion this month to sell their vehicles at 20-30 percent lower than regular prices to benefit from tax breaks and absorb seasonal demand at year’s end,” a KAMA official said.

Hyundai Motor began a two-month discount program in November for its flagship models such as the large-size Equus sedan, the midsize Sonata sedan and the subcompact Accent except for the independent premium Genesis line, said a company spokesman.

“We will offer cash discounts of up to 3 million won ($2,580) for models including the Sonata plug-in hybrid sedan, the Aslan compact, the i40 and i30 hatchback, the large-size Grandeur hybrid sedan and the Accent subcompact,” the spokesman said.

“But customers who buy any of the flagship Equus line will receive a 15 percent discount from regular prices. Prices for Equus models range from 68 million won to 143 million.”

The official said the models subject to the discounts were less popular among customers due to a lack of awareness about hybrid cars and resistance to high prices compared to gasoline or diesel models.

Hyundai’s sister company Kia Motors is also aggressively clearing its inventories, with discounts of up to 3 million won or lower interest rates for financing.

Models include the large-size K7 hybrid sedan, gasoline versions of K7, K5 and K3 sedans, the Sportage sport-utility vehicle and the Morning mini car.

Hyundai and Kia together form the world’s fifth-biggest carmaker by sales. The two companies suffered declines in net profit during the January-September period due to a relatively strong won and weak global demand.

Hyundai posted 4.98 trillion won net profit in the first three quarters, down 17 percent from 5.99 trillion won in the year-earlier period. Kia’s net profit fell 14 percent to 2.2 trillion won from 2.56 trillion won during the same period, regulatory filings show.

Three other domestic carmakers -- Ssangyong Motor, GM Korea and Renault Samsung Motors -- and imported automakers such as Volkswagen Korea and BMW Korea have joined the year-end clearance promotion.

To boost lackluster spending, the government introduced a 30 percent consumption tax break from Aug. 28 through Dec. 31 for vehicles, home appliances, cosmetics and some luxury goods such as watches and furniture.

As a result, individual consumption taxes fell from 5 percent to 3.5 percent.