South Korea’s domestic car market is expected to shrink for the first time in four years in 2012 mainly due to the economic slowdown and rise in household debt, an automotive think tank said Tuesday.

The Korea Automotive Research Institute said sales may contract 1.1 percent to 1.58 million vehicles next year from this year’s estimate of 1.60 million units.

The dip will the first time since 2008 that the domestic market fell from the previous year, the institute said.

“Weak economic growth, rise in household debt and lack of new car models will exert negative pressure on the overall market,” it said, adding that such negative developments will overshadow a possible rise in market demand caused by new free trade agreements.

KARI, however, said exports of locally made cars may move up 3.4 percent to 3.21 million cars, with imports to jump 7.4 percent on-year to 116,000 units.

KARI said the global car market may rise 4.2 percent to 78.55 million units in the new year thanks to solid market gains in Japan, the United States and China.

The Japanese market, which may contract around 20 percent this year, is expected to grow 10.5 percent in 2012, with the U.S. and Chinese market to expand 5.8 percent and 4.2 percent, respectively.

The European market is also likely to grow 1.6 percent on-year.

The think tank, meanwhile, said the global economy could expand 3.7 percent next year while South Korea may be able to pull off 3.6 percent growth, down from 3.9 percent forecast by KARI for 2011.

The growth estimate for South Korea is based on global oil prices hovering at $80-90 per barrel and the Korean won trading at an average 1,070 won to the U.S. dollar, it said. 

(Yonhap News)