Fitch: Hyundai, Kia face challenges

Fitch Ratings said it views the 2008 outlook for the auto sector in South Korea as stable, although several challenges persist.

The agency said it expects the growth engine for South Korean auto manufacturers in 2008 to continue to be in overseas markets, which contributed more than three-quarters of their combined sales volume in 2007.

However, further appreciation of the South Korean won will remain a major challenge to the South Korean auto manufacturers' appreciation as they rely heavily on domestic production, Fitch said.

Hyundai Motor Co. (BBB- with stable view) and Kia Motors Corp. (BBB- with stable view), which lead the South Korean auto sector, are expected to be less affected by the anticipated market contraction in the United States, owing to their relative competitiveness in the smaller and lower-priced car segments.

Hyundai and Kia are expected to focus increasingly on emerging markets to benefit from continuing robust growth, Fitch said.

The companies are likely to face increasing competition from Japanese and European auto manufacturers that also are eyeing those markets, the agency said.

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