Automotive Output Down 4.5% Due to Hyundai Motor Strike... All-Industry Production Flat in July (Comprehensive)

IT Offsets Automotive Strike Impact

Due to the strike by Hyundai Motor's labor union, production in South Korea's core automotive industry fell by 4.5% last month. The continued slump in the stock market, including a decline in the KOSPI, meant that the financial and insurance sector also decreased by 4.8%. Nevertheless, ahead of the release of new smartphones such as the Galaxy and iPhone, OLED production increased, allowing overall industrial output to remain flat. In contrast, facility investment soared to its largest increase in five months, supported by the semiconductor supercycle.

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Automotive Production Gaps from Strike... Offset by Rising OLED Output Ahead of Smartphone Launches

According to the "July Industrial Activity Trends" released by the Ministry of Data and Statistics on August 31, the all-industry production index (seasonally adjusted, 2020=100) for July stood at 120.2, the same as the previous month. After declining for two consecutive months in April (-0.5%) and May (-0.4%), overall industrial production rebounded by 2.4% in June but returned to flat growth after just one month.

The key factor halting the recovery was the automobile industry. Automotive production was down 4.5% from the previous month. Hyundai Motor's labor union held partial strikes for a total of nine days last month, resulting in an accumulated 60 hours of operational disruptions, which ultimately led to this 4.5% drop in automotive output. Management estimates that the production losses from the partial strike exceed 42,000 vehicles. The industry believes the resulting sales losses are likely to reach 1.12 trillion won.

Lee Doo-won, Director of Economic Trend Statistics at the Ministry of Data and Statistics, explained, "Overall, there was a strong base effect, but the Hyundai Motor strike, production line adjustments, and several other factors led to the decrease in automobile production."

However, the gap in automotive output was filled by a 20.7% surge in electronic component production. Driven by the launch of new smartphones from Apple and Samsung Electronics, production of electronic components including OLEDs rose sharply. Semiconductor production also increased slightly by 0.5%, resulting in a total industrial output gain of 0.2% for the manufacturing sector.

By contrast, the service sector, which is closely tied to domestic demand, remained sluggish. Service industry output declined by 1.3%, marking the largest drop in four years and five months since February 2022. In particular, financial and insurance services fell sharply by 4.8% due to declines in trading volume and transaction value in the stock market. Frequent rain and sweltering heat led to fewer visitors, causing a contraction in arts, sports, and leisure-related service industries as well.

After the crisis, companies raised prices on 53 processed food items, including coffee, bread, frozen foods, and instant noodles, causing an emergency in the 'table price' situation. Many analysts suggest that companies had been restraining price increases in cooperation with the government's price stabilization measures but raised product prices massively during the government’s hiatus. The photo shows an instant noodle display at a large supermarket in Seoul on June 10, 2025. Photo by a reporter.

Retail Sales See Largest Decline in 2 Years and 7 Months... Government Maintains "Consumption Recovery Momentum"

The retail sales index, which serves as an indicator of consumer spending on goods, also dropped by 2.4%. In particular, retail sales of passenger vehicles fell by 11.1%, their largest decrease since January 2024 (-14.6%), as the combination of the end of the individual consumption tax cut and the base effect took hold. Director Lee explained, "Retail sales saw a significant increase in June as disruptions in auto parts supply were resolved. The decrease in passenger car sales this month is a result of this base effect."

The government is also focusing on the base effect in its assessment, stating that, in a broader context, the trend of consumption recovery continues despite the decrease in retail sales. An official from the Ministry of Economy and Finance commented, "Considering the significant month-to-month volatility, when combining June and July, retail sales increased by 1.5% compared to April and May. The growth rate of credit card sales rose from 3.7% in July to 4.5% between August 1 and 26, indicating that the consumption recovery momentum appears to be sustained."

On the 11th, at a site meeting of the Democratic Party of Korea's 3rd Mega Project Support Special Committee held in front of a semiconductor factory in Wonsam-myeon, Cheoin-gu, Yongin, Gyeonggi Province, Chairman Byungdo Han is inspecting the site. 2026.8.11 Photo by National Assembly Press Photographers Group

Facility Investment Rises 15.4% Thanks to Semiconductor Supercycle

Corporate investment remained active. Facility investment increased by 7.5% from the previous month, continuing its growth for two consecutive months following a 6.9% rise in June. This is the largest increase in five months. Notably, investment in equipment for semiconductor manufacturing—aimed at expanding memory semiconductor production capacity—rose by 4.2%. Investment in transportation equipment, driven largely by other transport materials, also increased by 15.4%. Director Lee noted, "The trend of increased investment in semiconductor manufacturing equipment for memory chip capacity expansion has continued, and this month, there were also increases in investments in aircraft and ships."

Although production and consumption stalled somewhat, the overall momentum of the economy continued to improve. The coincident composite index, which reflects the current economic situation, rose by 0.8 points from the previous month, while the leading composite index, which forecasts future economic trends, rose by 0.4 points. Nevertheless, corporate investment remained active. Thanks to continued investment in semiconductor manufacturing equipment for expanded memory chip capacity, facility investment grew 7.5% from the previous month, marking the second consecutive month of growth and the largest increase in five months.

An official from the Ministry of Economy and Finance stated, "Amid significant external uncertainties such as the Middle East war and continued hardship for everyday people, we will work to further solidify the momentum of economic recovery and reinforce policy efforts to ensure the gains from growth are broadly shared across society."

This content was produced with the assistance of AI translation services.