The automobile industry was one of South Korea's major growth and export industries in the 1980s. By the late 1980s, the capacity of the South Korean motor industry had increased more than fivefold since 1984 it exceeded 1 million units in 1988. Total investment in car and car-component manufacturing was over US$3 billion in 1989. Total production (including buses and trucks) for 1988 totaled 1.1 million units, a 10.6 percent increase over 1987, and grew to an estimated 1.3 million vehicles (predominantly passenger cars) in 1989. Almost 263,000 passenger cars were produced in 1985--a figure that grew to approximately 846,000 units in 1989. In 1988 automobile exports totaled 576,134 units, of which 480,119 units (83.3 percent) were sent to the United States. Throughout most of the late 1980s, much of the growth of South Korea's automobile industry was the result of a surge in exports 1989 exports, however, declined 28.5 percent from 1988. This decline reflected sluggish car sales to the United States, especially at the less expensive end of the market, and labor strife at home.

The industry continued to grow, however, because of a surge in domestic demand, up 47 percent during the first half of 1989. In 1989, for the first time since car exports had doubled in 1985, domestic sales surpassed exports two-thirds of the cars manufactured were sold domestically. Most of the domestic demand came from first-time car buyers whose savings had been buoyed by double-digit wage increases each year since 1987. Other factors leading to the growing domestic demand for motor vehicles included stable or slightly decreased new car prices because of cuts in special consumption taxes, reduced fuel taxes, and growing economies of scale by manufacturers.

Throughout the 1970s and 1980s, the automobile industry was subject to a series of government controls and directives designed to nurture the industry and prevent excess competition. For most of the 1980s, Hyundai was the only company permitted to manufacture passenger cars, but in 1989 Kia Motors and Daewoo were allowed to reenter the passenger car business. In 1989 Ssangyong Motors became South Korea's fourth car manufacturer.

South Korea's auto parts industry grew rapidly in the late 1980s, from US$3.8 billion in 1987 to US$4.6 billion in 1988 (US$4 billion produced locally). Automotive parts imports, most of which came from Japan, totaled US$610 million in 1988 (down from US$700 million in 1987). In 1989 South Korean automobile and parts manufacturers planned to spend more than 2 trillion won (US$2.8 billion) on facility expansion, research, and development.

Data as of June 1990