Car sales in South Korea are expected to contract for the first time in three years in 2016 with foreign brands likely to keep expanding their market share, a report by Hyundai Motor Group's think tank showed Tuesday.
  

Carmakers -- foreign and local brands -- are expected to sell about 1.76 million units in South Korea next year, down 1.3 percent from this year's estimated 1.78 million units, according to the report obtained by the English division of Yonhap News Agency.
  

The report was compiled by the Korea Automotive Research Institute, a think tank that provides information needed for Hyundai Motor Co. and its smaller affiliate Kia Motors Corp. to draw up their sales and other business plans.
  

"We expect that domestic car sales will reach around 1.76 million units next year, down 1.3 percent from a year earlier, with local brands facing a decline... but foreign brands likely to keep expanding their ground," the report said.
  

This would mark the first time in three years that the on-year domestic vehicle sales would decline. This also follows a 7.1 percent growth projected for 2015.
  

Sales of local brands including Hyundai Motor and Kia Motors, which command around 70 percent of the Korean market, will total 1.49 million units next year, compared with 1.54 million estimated for this year.
  

The report said that rising household debt burden could hurt consumer sentiment and the government's plan to roll back a temporary tax cut on car purchases at the end of this year could also serve as a downside risk.
  

Foreign brands, however, will likely keep expanding their ground in South Korea, though the growth rate could slow down.
  

According to the report, foreign car sales, which include commercial vehicles, are expected to reach an all-time high of 263,000 units next year, up 8.2 percent from this year's estimate. This is lower than a 23.8 percent spike projected for this year.
  

Still, foreign brands will account for nearly 15 percent of the total vehicle demand in South Korea next year, which is higher than 13.7 percent this year, the report showed.
  

The report said that if cars imported by local automakers, such as the QM3 of the Renault Samsung Motors Co. and the Impala of GM Korea Co., are included, foreign brands will likely see their market share exceed 17 percent for the first time next year.  
  

Hyundai Motor Group, which holds Hyundai Motor and Kia Motors under its wing, draws up its sales target and business plans based on the KARI report and others items, including opinions exchanged between high-ranking Hyundai officials and chief overseas dealers on Monday.
  

Earlier, media reports showed that Hyundai Motor Group, the world's fifth-largest auto giant, aims to sell an all-time high of 8.3 million cars at home and abroad next year, a little higher than this year's target of 8.2 million units.
  

Company officials, however, said that nothing has been decided, adding that they need more time and data including the KARI projection to finalize their 2016 business plan.
  

During the January-November period, Hyundai and Kia sold a combined 7.19 million cars, raising prospects that they would not be able to beat their annual objective for this year.
  

Meanwhile, global demand for vehicles is expected to expand 3.9 percent on-year in 2016 to around 88.8 million units thanks in part to a recovery in the Chinese market. This is higher than a 1.2 percent growth forecast for this year.
  

The report showed that car sales in China will grow 8.3 percent to 21.58 million units, while those in the United States will inch up 1.6 percent to 17.48 million units.
  

Russia and Brazil will continue to remain in a slump with sales in the two emerging countries forecast to contract 3.8 percent and 1.2 percent, respectively to 1.54 million units and 2.45 million units.
  

"In that KARI provides conservative forecast for business conditions, it seems to be painting a relatively optimistic outlook for the market in 2016," said Seo Sang-moon, an analyst at Korea Investment & Securities. (Yonhap)