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Completed automobiles fill a yard in preparation for export aboard ships in Ulsan, South Korea, in September 2022. (Yonhap)

Global automobile demand is expected to rise next year, but South Korean automobile production will fall amid the effects of factors including the US’ Inflation Reduction Act (IRA), analysts are predicting.

A report on “prospects for the 2023 automobile industry” published Monday by the Korea Automotive Technology Institute (KATECH) found that major institutions were forecasting a rise in global automobile demand compared with 2022.

With this year’s global automobile sales estimated at over 81.5 million units, next year’s demand was predicted to amount to between 81.7 million and 85.3 million vehicles, or 4.7% higher.

According to these predictions, even if new demand declines amid the effects of rising interest rates and poor business conditions, global automobile demand is still expected to rise as the semiconductor supply crunch loosens with millions of vehicles on standby.

A recovery to the all-time sales record set in 2017 was expected to come no earlier than 2025. Difficulties with semiconductor procurement and other supply chain issues are expected to be resolved by 2024, with global automobile sales recovering to the level of around 97 million vehicles by 2025 amid growing demand for electric vehicles.

Demand for hybrid and other eco-friendly vehicles was predicted to exceed 9 million this year and 12 million next year before passing 20 million by 2025. Next year’s internal combustion engine vehicle demand was estimated at over 73 million.

Even if global automobile demand does rise, South Korea’s sales and production volume for both domestic demand and exports are expected to drop.

Domestic sales for next year were estimated at over 1.66 million vehicles, down 0.5% from this year. Barring a deferment of the effects of the US Inflation Reduction Act, exports are expected to amount to around 2.1 million vehicles, a decline of 4.2%.

With this slack performance in domestic sales and exports, domestic production is expected to reach roughly 3.49 million vehicles, down 3.0% from this year.

“As demand weakens in the major export markets of the US and Europe, there is a strong likelihood of small declines in domestic demand, exports, and production for South Korean automobiles in 2023,” predicted KATECH research fellow Maeng Ji-eun.

By Ahn Tae-ho, staff reporter

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