Korean carmakers have warned that if the Iraq war lasts more than three months, its domestic vehicle production will fall by 9.5 per cent, or 300,000 units, to 28.5 million units.

A Korean Automobile Manufacturers Association report says domestic demand for Korean vehicles are expected to further drop by 7 per cent this year from a year ago to 14.5 million units, while exports bound for the United States, Western Europe and the Middle East are expected to decrease by 7 per cent this year from a year ago to 14 million units, said the report.

By contrast, if the U.S.-Iraq war ends quickly, the report expects domestic automobile production to pick up by 1.7 percent. The figure could be over five per cent if the U.S. and European economies show signs of a rapid recovery after the war.