Published on : Jun 05, 2014
According to the industry sources on Sunday in Seoul, the South Korea’s automobile and electronics industrial sectors are experiencing a strong wave of local currency in the country. This is forcing some of these sectors to downgrade second-quarter earnings estimates.
The Korean won has strengthened against the U.S. dollar in late March and this figure has risen to 1,020.1 won, as of Friday. When this figure is compared with an exchange rate in the range of 1,060 won to 1,070 won, it is seemingly impressing in the first few months of 2014.
According to Korea Automotive Research Institute (KARI), a major part under the world’s fifth-largest automotive conglomerate – Hyundai Motor Group, the auto industry is projected to suffer 420 billion won (US$411.6 million) in lost sales. This condition will arise if the won gains 10 won to the dollar.
Also, since the global car market has become excessively competitive, the current exchange rate trend is becoming a worrisome issue. It is getting all the more difficult because giant rivals such as German and Japanese carmakers are introducing new cars and pushing for greater sales in the industry.
German companies are making profit and progressing by capitalizing on productivity and technological prowess, while the Japanese companies such as Honda and Toyota have profited from the weak yen. This makes their cars cheaper in different countries abroad.
KARI predicts that there is even a bigger risk if won appreciates the value of the rate further and trade in the 900 won range to the U.S. dollar in the latter part of next year.
The think tank said there is a pressing need to develop new technologies, reduce cost, and expand into new markets.
Other companies such as Samsung Electronics Co. are getting affected with exchange rates and in addition many new securities companies are expecting weaker earnings in the second quarter this year.