Korea's sluggish auto industry: How can firms tackle the crisis?
- 5 years ago
For years, the nation's auto industry has been a key contributor to Korean exports.
Unfortunately, these days, car production, shipments and domestic sales are all falling.
Kim Hyesung sheds light on what could be causing this turnaround.
From the GM Korea plant shutdown to Korea's number one automaker Hyundai Motor posting disappointing third-quarter net profits, which fell by two-thirds,... the nation's auto industry is showing red flags.
After recording production and sales of near 10 million vehicles in 2015, more than 10 percent of global auto market share,... exports and domestic sales have started to fall sharply and are set to drop even further this year.
"Korean automakers have enjoyed solid profits in recent years. This was more because they benefited from General Motors' bankruptcy, and Japanese and German automakers' recall crises rather than product competitiveness. But during this boom period, Korean automakers didn't invest as much in R&D. Korean autos fell behind market trends, playing catch up on SUVs."
The auto industry's struggle is a concern as it not only employs 350-thousand people, but also supports both upstream and downstream industries.
It accounts for about 13 percent of Korea's manufacturing production, and more than 10 percent of value added goods including steel, glass and even financial services.
Already, data shows more than a third of Korean auto parts companies posted losses in the first half this year, and a growing number are filing for bankruptcy.
"Korea's auto and auto parts companies have a vertical structure, parts companies rely more than 80 percent on local auto conglomerates. Eventually, to tackle this crisis, restructuring of the whole auto industry will be key, including raising competitiveness to fit market trends, and raising productivity through trimming the workforce."
With demand for autos already slowing down in the U.S., Europe and China, competition is becoming even fiercer.
Experts also warn that the whole industry is at an inflection point, shifting towards driverless cars and electric cars,... and that investing in R&D to come up with competitive cars, and cooperating with ride hailing companies and software companies is more important than ever.
Kim Hyesung, Arirang News.
Unfortunately, these days, car production, shipments and domestic sales are all falling.
Kim Hyesung sheds light on what could be causing this turnaround.
From the GM Korea plant shutdown to Korea's number one automaker Hyundai Motor posting disappointing third-quarter net profits, which fell by two-thirds,... the nation's auto industry is showing red flags.
After recording production and sales of near 10 million vehicles in 2015, more than 10 percent of global auto market share,... exports and domestic sales have started to fall sharply and are set to drop even further this year.
"Korean automakers have enjoyed solid profits in recent years. This was more because they benefited from General Motors' bankruptcy, and Japanese and German automakers' recall crises rather than product competitiveness. But during this boom period, Korean automakers didn't invest as much in R&D. Korean autos fell behind market trends, playing catch up on SUVs."
The auto industry's struggle is a concern as it not only employs 350-thousand people, but also supports both upstream and downstream industries.
It accounts for about 13 percent of Korea's manufacturing production, and more than 10 percent of value added goods including steel, glass and even financial services.
Already, data shows more than a third of Korean auto parts companies posted losses in the first half this year, and a growing number are filing for bankruptcy.
"Korea's auto and auto parts companies have a vertical structure, parts companies rely more than 80 percent on local auto conglomerates. Eventually, to tackle this crisis, restructuring of the whole auto industry will be key, including raising competitiveness to fit market trends, and raising productivity through trimming the workforce."
With demand for autos already slowing down in the U.S., Europe and China, competition is becoming even fiercer.
Experts also warn that the whole industry is at an inflection point, shifting towards driverless cars and electric cars,... and that investing in R&D to come up with competitive cars, and cooperating with ride hailing companies and software companies is more important than ever.
Kim Hyesung, Arirang News.