SEOUL, KOREA - A study said that for every 10 won fall in the won-dollar exchange rate the nation's car manufacturers would see their sales revenue decline by 420 billion won. The Korea Automobile Research Institute said this on May 26 in a report "Won-Dollar Exchange Rate Outlook and Its Implications," adding Korea's automobile assembly companies will suffer in terms of overseas price competitiveness as the won stays strong.
The report said that it would be difficult for the domestic auto makers to offset the exchange impact through other means such as local price hikes as they face fierce competition everywhere. It estimated that the auto manufacturers will experience of about 420 billion won in sales revenue loss for every 10 won fall in the won-dollar exchange rate.
The currency rate has appreciated rapidly to 1,021.50 won per dollar in May from an average of 1,064.75 won in January. If the trend goes on unchecked until the year's end, the Korean car maker would loss about 1.6 trillion won in sales revenue. The report also put out an estimate that the next year's exchange rate would further decline to a level of 900 won per dollar. This is based on the prediction that the U.S. monetary authorities would raise the benchmark rate in the latter half of this year, which would keep the Korean won strong vis-a-vis the U.S. dollar.
The report said, "Korea's exporting companies must embrace the strong won trend to go on for a long time and come up with response measures to cut cost and raise operational efficiency. The government also needs to support the companies by stabilizing the exchange rate."
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