The strike "will throw a cold blanket over the slight recovery pace of the country's exports," South Korea's Ministry of Trade, Industry and Energy warned in a statement this week.
"The labour side should end the strike and make efforts to normalize operation, while the management should do its best to complete negotiations with the union to minimize the impact on the local and entire economy," the ministry said.
As Korea's largest carmaker, Hyundai, and its sister company Kia Motors, dominate the domestic auto industry, which makes up around 12 percent of Korea's manufacturing industry and 14 percent of total exports. Hyundai's output losses from the strike could further weigh on the nation's already-vulnerable exports, which declined for 19 out of the past 20 months.
If left unresolved, the labor dispute could delay exports of Korean vehicles worth $1.3 billion, the Korea Herald reported, citing the government.
Labor Minister Lee Ki-kwon said on Wednesday that the government would consider all possible measures to end the strike given its impact on the broader industry and national economy, the Korea Herald reported.
Hyundai's deep-rooted issue of compensation is symptomatic of labour market challenges in South Korea, Trinh Nguyen, senior economist for emerging Asia at Natixis, explained.
Management proposed in August to increase monthly wages by 58,000 won ($52), in addition to a 350 percent bonus and a one-time cash payment of 3.3 million won ($3,000), for each worker, Yonhap News reported. But nearly 80 percent of union members rejected the deal.
Asia's fourth-largest economy is experiencing a decline in the working-age population, a factor that gave employees leverage over companies, Nguyen pointed out.
Current developments could also pose weighty consequences on the future of Korean manufacturing.
"At the moment, 40 percent of Hyundai's production is within Korea. But given the challenges the firm face regarding production and profitability, it will likely consider off-shoring more production in the future," Nguyen said.
Even outside the auto industry, workers have demanded changes to existing wage conditions. On Tuesday, the Korean Public Service and Transport Workers' Union began an all-out strike to protest the government's merit pay system.
The country's labour unrest has pushed several firms, including Samsung Electronics, to move factories into lower-cost countries such as Vietnam, Nguyen said. "Increasingly, other Korean firms will be pushed to do so to remain competitive globally."
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