March 28 (Bloomberg) -- The weakening yen is becoming a “weapon” for Japanese automakers by making them more competitive, said a senior executive at South Korea’s second-largest carmaker.
“The weakening yen reinforces the Japanese competitors,” Kia Motors Corp. Vice President Lee Soon Nam told reporters today at the Seoul Motor Show. “The weakening yen will become the Japanese automaker’s weapon, they now have reinforcements.”
The Japanese currency has weakened 17 percent against the South Korean won in the past six months, making the country’s exports cheaper versus its Asian neighbor. The slide in the yen has accelerated since Oct. 31, when Shinzo Abe, who became Japan’s prime minister in December, advocated for the decline to aid the world’s third-largest economy.
Hyundai Motor Co. Chief Financial Officer Lee Won Hee said during a conference call on Jan. 24 that a weak yen allows Japanese automakers to aggressively market in regions where the Korean carmakers compete, such as Australia and Russia. If the trend continues it will have an adverse affect on Hyundai’s profitability, he said at the time.
Morgan Stanley has estimated the currency advantage generates about $1,500 a car for Japan’s automakers, while their U.S. competitors put the figure at about $5,700.
Toyota Motor Corp., the world’s largest automaker, expects U.S. auto demand to reach 15.3 million cars and light trucks this year, about 5.5 percent more than in 2012.
Hyundai, after boosting U.S. sales of its cars and trucks 75 percent since 2008, expects its slowest annual growth in the market in five years as it bumps up against limits in plant capacity, the company said earlier this month.
Kia is 34 percent owned by Hyundai.
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