Hyundai and affiliate Kia saw domestic sales fall four and five percent last year, though overall sales were up six percent thanks to growing business in China and the U.S.
By contrast, GM Korea, Ssangyong and Renault Samsung saw combined domestic sales rise 8.6 percent over the same period.
Experts blame increasing sales of imported cars for the flagging sales at Hyundai and Kia, the No. 1 and 2 players in the Korean market.
The market share of imported cars surpassed 12 percent last year, and that mostly ate into Hyundai and Kia's business. GM Korea and Renault Samsung focus on low- to mid-priced cars in the W10-20 million (US$1=W1,050) range, and Ssangyong mainly sells SUVs, so they were able to avoid competing directly with imports, according to analysts.
Hyundai and Kia are responding by intensifying marketing efforts for its diesel and hybrid models.
◆ Foreign Competition
Hyundai sold around 640,000 vehicles at home and Kia 458,000 last year. Their combined sales of 1.1 million cars were down 4.4 percent compared to 2012.
The two automakers still commanded an impressive 80 percent share of the domestic market for Korean cars, but neither has been able to produce a bestseller of which more than 100,000 units a year are sold. The top sellers were the compact Avante with 93,966 units and the subcompact Morning with 93,631, which fetch slimmer margins.
A researcher at the Korea Institute for Industrial Economics and Trade said Hyundai and Kia have lost "a significant number of customers" for mid-sized to large sedans to imports, reducing their market share in those lucrative segments.
Sales of imported cars during the first 11 months of 2013 rose 20 percent compared to the same period of 2012. And six out of every 10 imported cars sold last year were diesel models, while hybrids like the Toyota Prius were also hot sellers. Hyundai and Kia both have a weak diesel and hybrid lineup. Now they plan to beef them up.
◆ Soaring Popularity of SUVs
A noticeable trend in global car sales since the 2008 global financial crisis has been soaring sales of SUVs. Last year, sales of Hyundai's mid-sized Sonata passenger cars and large sedans such as the Grandeur and Genesis shrank 12.4 percent, but sales of the Tucson and other SUVs rose around 20 percent.
Kia also saw passenger car sales drop 8.7 percent, while SUV sales fell only 0.8 percent. GM Korea saw sedan sales drop 10 percent while SUV sales surged a whopping 41.9 percent.
Ssangyong, where SUVs account for more than 90 percent of sales, was the biggest beneficiary. The Korando SUV lineup at Ssangyong (New Korando C, Korando Sports, Korando Turismo) racked up sales of 53,000 units last year, outpacing rivals such as the Hyundai Tucson and Kia Sportage R small SUVs.
As a result, Ssangyong's domestic sales soared 34.1 percent and its total sales including exports rose to, an 11 year-high.
Meanwhile, Hyundai and Kia's overseas sales performances were stellar. The two automakers saw overseas production surpass 4 million units for the first time last year with cars manufactured abroad now accounting for 55 percent of total output. That mitigated the poor performance at home.
GM Korea and Renault Samsung, by contrast, saw exports fall 2.5 percent and 15.1 percent due to decisions at headquarters to restructure global manufacturing bases. GM is to close down sales of its Chevrolet brand in Europe two years from now, leading to forecasts of a more than 20-percent drop in exports for GM Korea in 2014 and 2015.