South Korean car sales in China plunged in August, dropping 39 percent versus a year ago amid the lingering diplomatic spat over Seoul’s host of a U.S. missile shield with little signs of improvement in business prospects in the world’s largest auto market.

According to Hyundai Motor Co. and Kia Motors Corp. on Sunday, their combined August sales in China reached 76,010 units, down 38.8 percent from 124,116 units a year ago. Sales from Hyundai Motor’s joint venture Beijing Hyundai Motor came to 53,008 units, down 35.4 percent from 82,025 units a year ago and sales from Kia Motors’ joint venture Dongfeng Yueda Kia Motors stood at 23,002 units, down 45.4 percent from 42,091 units.

The drop in their July sales slowed to 36.7 percent from around 60 percent in previous months since March, raising hope for a recovery, but the hope became slim as the decrease persisted in August.

Market watchers cautiously interpret that if the current situation continues, it could be the last straw that breaks the camel`s back for Hyundai Motor as Lotte is reviewing the pullout of its companies from China, giving in to the Chinese government’s retaliatory measures against Korean firms operating in China in the wake of Korea’s deployment of the U.S.’s Terminal High Altitude Area Defense (THAAD) on its soil.

One potential disruptive element is a conflict with Hyundai’s Chinese partner BAIC Group. Four local plants came to a halt after BAIC delayed payment to suppliers in late August, which triggered a widespread rumor that their partnership could go kaput. The payment crisis was eventually over last Wednesday but the current sales slump could reignite the conflict at any time, industry observers worried.

Hyundai Motor Group still rejects a scenario of its business exit from China, saying it is unimaginable considering its broad activity there. Hyundai Motor’s fifth China plant located in Chongqing started operations this month while Kia Motors’ partner company owns three plants to roll out Kia brands. In total, they are running eight plants to produce finished cars in China.

Moreover, China is the largest market for Hyundai Motor and Kia Motors. The two Korean carmakers sold 1.14 million cars and 650,000 cars, respectively, in China last year. Their China sales represented 23.5 percent and 21.5 percent, respectively, of their worldwide sales last year.

As of 2:33 p.m. on Monday, Hyundai Motor shares were up 0.4 percent at 137,000 won while Kia Motors were down 1.3 percent at 30,500 won.

By Woo Je-yoon

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]