An improvement in Seoul-Beijing relations, which have recently been strained by the deployment of a U.S. missile defense system, could help revive demand for South Korean made automobiles in the world's No. 1 car market, industry sources said Tuesday.
South Korea and China agreed earlier in the day to put back on track ties that have been soured for the past several months, as China has put in place economic retaliation against South Korea over the deployment of the Terminal High Altitude Area Defense (THAAD).
Seoul has maintained that THAAD has been stationed to deal with North Korea's nuclear and missile threats and does not target China, but Beijing sees it as a security threat as the powerful radar system can scan deep inside its territory.
"We see a chance to recover sales on a gradual basis if the official 'normalization of ties' leads to easing of anti-South Korean sentiment," an official of Hyundai Motor Co. said. "In the case of the automobile market, the Chinese government actually did not block consumption of South Korean cars, unlike in the tourism industry."
Since mid-March, China has banned its travel agencies from selling package tour programs to South Korea, while many groups in China rallied people not to buy goods made in a country that threatened its security.
Such calls are seen as having hurt South Korean car sales, as well as other manufactured goods.
Sales of cars in China by Hyundai Motor Co. plummeted 37.2 percent to 2.75 million units for the first nine months this year from a year earlier.
Kia Motors Corp., Hyundai's sister company, also posted a 40.9 percent drop in sales in China during the same period.
Ssangyong Motor Co., the maker of the Tivoli compact and flagship G4 Rexton SUV, signed a letter of intent with Shaanxi Automobile Group last year to conduct a feasibility study on building a plant in the Chinese city of Xian. The project, however, has been virtually stalled since early this year.
"We will have to wait and see how our partner will react to the thawing relations between Seoul and Beijing," a Ssangyong official said.
SsangYong Motor President Choi Jong-sik said last week that the carmaker is reconsidering the project due to regulations and lower demand for South Korean vehicles in China.
It will take time for the thawing ties to affect South Korea's auto sales in China, industry sources said, citing the growing protectionism in the auto industry in China.
"We will try to provide differentiated products and services to Chinese clients, as we understand it will take a considerable amount of time for us to recover the damage, which is shown by the row between China and Japan over the Diaoyudao islands in 2012," a Hyundai official said.
At the time, the anti-Tokyo rallies that spread throughout China caused Japanese cars sales to fall sharply, damage that required some time to repair.