South Korea's automobile market will grow 2 percent on-year to record-high sales of 1.65 million units in 2015, a report by the Korea Automotive Research Institute (KARI) showed Sunday.

The research arm of Hyundai Motor Group, the world's fifth-largest automotive conglomerate, said next year's sales will surpass the 1.64 million cars sold in 1996, the boom year for the country's car industry.

KARI said next year's increase will stem from the growing number of older cars on the road that need to be replaced, a rise in demand for SUVs and new vehicles hitting the market. In addition, it said a spike in sales of imported cars is expected to contribute to the increase.

The think tank said sales of small or mini cars, helped by various incentive programs, will rise, while those of midsize cars will decline as more people opt for SUVs.

It said import car sales will surge 14.8 percent in the New Year, vis-a-vis 2014, to 225,000 units.

"The increase comes in part from the strong yen and benefits from the free trade agreements signed with various car-exporting countries that are making foreign brands more affordable to buy," KARI said.

The weak yen has made Japanese cars more price competitive in the country.

The latest findings showed the global car market will advance 4.2 percent to 87.2 million units in the New Year, with growth being fueled by China and India. It predicted car sales in the two countries will grow around 9 percent on-year in 2015. Sales in Europe will also rise, along with Brazil, the report predicted.

KARI said that South Korean carmakers need to be on alert in 2015, especially since European carmakers, such as Volkswagen, are expected to expand their market presence in China.

China is the largest market for South Korean cars, and has contributed to the steady growth of Hyundai Motor Co. and Kia Motors Corp., the country's two largest carmakers. (Yonhap)