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SEOUL, Jan 30 (Reuters) - South Korea's top automaker Hyundai Motor , facing a fierce price war, said on Thursday it plans to cut interest rates on financing deals in the key U.S. market for its popular EF Sonata sedans and Santa Fe SUVs.
Hyundai, ten-percent owned by U.S.-German automaker DaimlerChrysler AG , is betting on exports to drive up profits in 2003 as domestic sales are not expected to be as strong as last year, after the South Korean government terminated tax incentives on automobile purchases in September.
But the climate for sales in the U.S. market has become tougher for Hyundai and affiliate Kia Motors Corp , as General Motors Corp , the world's largest automaker, has fueled a relentless price war by offering aggressive discounts to try to boost its U.S. market share.
A Hyundai Motor official told Reuters the firm planned to slash interest rates on installment financing in the United States to around 1.5 to 2.5 percent, similar to those of Japanese rivals.
Currently, U.S. customers on a one-year installment plan pay between 3.5 to 4.0 percent interest per month for Hyundai cars, depending on the model, the official said.
A Kia official said it would make a similar move.
INCENTIVES SOON
The Hyundai official said the slashed interest rates would take effect "soon", but could not give an exact timetable.
In January only, Hyundai is offering zero to 1.7 percent interest for one-year installment customers for small passenger cars such as the Elantra and Accent, according to the auto maker's web site. For the same period only, Kia is offering zero percent interest for its Sorento SUV for U.S. customers on a one-year installment plan.
In addition, dealers who sold more than 15 automobiles a month would be eligible for discounts of $300 per vehicle from the current $100, the official said.
At the end of last year, Hyundai ranked seventh in U.S. automobile sales, accounting for a 2.2 percent market share, just behind Nissan Motor Co , but higher than Mitsubishi Motors Corp and Mazda Motor Corp .
Kia held a 1.4 percent market share.
Hyundai saw U.S. sales last year rise 8.3 percent to 375,119 automobiles. U.S. sales accounted for around 40 percent of Hyundai's total sales last year.
The Elantra was Hyundai's top-selling car in the U.S. market last year, accounting for more than 120,000 units or around 30 percent of total sales. The Santa Fe SUV came in second with almost 79,000 units sold, up 40 percent from 2001, Hyundai said.
Hyundai shares closed up three percent on Thursday at 24,700 won, outperforming a broader market index that ended up 1.5 percent. Kia shares closed up 2.6 percent at 7,800 won.
(With additional reporting by Lee Shin-hyung)