HYUNDAI Motor Co, South Korea's biggest car maker, slashed its 2008 domestic sales target by 6 percent as rising oil costs and a weakening economy damp demand for automobiles.

Hyundai aims to sell 630,000 cars, including its Sonata sedan and Santa Fe sport-utility vehicles, in the domestic market this year, down from an earlier target of 670,000, the Seoul-based auto maker said yesterday. The auto maker sold 625,275 vehicles in the local market last year.

Hyundai, its affiliate Kia Motors Corp and other South Korean car makers are facing slowing demand at home as consumer confidence in Asia's fourth-biggest economy slumped to the lowest level in more than seven years in the second quarter. Rising food and oil prices have cut the purchasing power of potential car buyers in the country.

Exports up

"Even the lowered target may not be easy for Hyundai to meet at this point," said Park Hwa Jin, an analyst at Shinyoung Securities Co, which has a "buy" rating on the stock. "The good news is its exports are doing great and the company will be able to offset the lower domestic sales with sales in overseas markets."

Hyundai Motor shares have risen 0.3 percent this year in Seoul trading, outperforming the benchmark Kospi index's 17-percent slide.

Domestic sales at Hyundai declined 15 percent in June, the first drop in six months, as higher prices for oil and consumer goods damped demand for cars, the company said last week. Exports gained 20 percent last month as its fuel-efficient model won more customers out of Korea, leading an 11-percent increase in overall June sales for the company.

South Korean inflation will accelerate to the fastest pace in a decade this year, the Bank of Korea said on July 1, propelled by record fuel and food prices that will also hinder household spending and business investment.

Cautious outlook

Consumer prices will climb 4.8 percent in 2008, the bank said. "The outlook for second-half sales in the home market isn't that bright, as we face a slowing economy and surging oil prices," a Hyundai spokesman told Bloomberg News.

South Korea's consumer confidence slumped to the lowest level in more than seven years as spiraling food and energy costs sapped people's spending power, the nation's central bank said on June 25.

The sentiment index dropped to 86 in the second quarter, the lowest since the end of 2000, from 105 in the previous three months, the Bank of Korea said. A reading of less than 100 indicates pessimists outnumber optimists.

Economic growth will slow to 4.7 percent this year as business and consumers curtail extra spending, the finance ministry forecast. That's weaker than last year's 5-percent expansion and falls short of the government's earlier 6-percent target.