The drop resulted mainly from industry leader Hyundai Motor Co.'s production cut. Hyundai's vehicle production tumbled 14.6 percent on-year to 225,725 units during the two-month period.

No. 2 industry Kia Motors Corp. saw its production rise to 249,815 units from 239,010 over the cited period, and three smaller makers -- GM Korea Co., Renault Samsung Motors Co. and Ssangyong Motor Co. -- all reported increased output.

Given the fall in auto output, industry watchers said, it will be difficult for South Korea to regain its status as the fifth-largest car producer in the world this year.

South Korea had been the world's No. 5 auto maker between 2005 and 2015, but its global ranking slipped a notch last year as India produced more vehicles. India's vehicle production came to 4.48 million units in 2016, outstripping South Korea's 4.22 million.

The decline in South Korea's 2016 auto output was attributed to strikes by unionized autoworkers and decreased exports stemming from slumping demand from emerging economies.

Analysts said the outlook for this year is gloomy amid continuing uncertainties over the global economy and a lack of government measures to boost domestic demand, like a cut in consumption tax.

"Combined with automakers' self-rescue efforts, the government needs to come up with a variety of steps to expand output since the industry's weakness could have far-reaching repercussions on the national economy," an industry source said. (Yonhap)