South Korea’s auto parts supply chain is rapidly losing competitiveness and manpower due to slow response to faster transition to automated and electric mobility amid lack of financial resources.
According to Lee Hang-koo, researcher at Korea Automotive Technology Institute, the country had 8,966 auto parts suppliers employing 10 or more as of last year. Their payroll decreased last year. Manufacturers were not able to properly respond to the rapid change in industry environment as they mainly focused on engines for diesel locomotives. In a survey conducted by Korea Automobile Manufacturers Association of 300 local car and car component manufacturers including three finished automakers between August and October, nearly half were not prepared for a shift to EVs.
Companies cannot complain of their hardship as lenders could call off loans on favourable rates under government backing. A mere downsize in components is bringing adverse effect on the industry as a whole. The industry however cannot afford migration to electric components through research and development. Lee from Korea Automotive Technology Institute noted that mid-size manufacturers are holding out with funds they earned during heyday from 2010 to 2015 but smaller players can only survive by reducing factory workers. Production hiccups at finished carmakers due to parts shortage have made matters worse for Korean components industry. Auto component makers also face increased labour cost burden in a Covid-19 environment as they need to hire local workforce that can make up for shortage in foreign laborers. Companies also need to cope with rising materials costs for component production, mainly those of cold rolled plate and copper. Industry experts fear a chain bankruptcy in the supply chain when EV migration is accelerated. Local manufacturers that produced components for internal combustion engine vehicles would have to completely create new equipment and change overall ecosystem from facility investment to hiring, industry insiders noted.
Source: Pulse
Image Source: Google Images
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