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
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
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
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