Less than three years have passed since the Korean automotive industry plunged
into recession as the Asian economic crisis swept though the region. The steady
growth of the industry through the 1990s was halted in its tracks; in 1998 vehicle
output fell by over 30% to less than two million units and the financial health
of many of its players took a turn for the worse.
Since then most press commentary has concentrated on the misfortunes of the
big players dragged down by the recession. Kia moved under the wing of Hyundai,
whilst Ssangyong found at least a temporary home with Daewoo, whose own fate looks likely to be absorption by Ford.
The attention paid to the fate of the big conglomerates or ‘chaebols’ has
tended to overshadow what has been happening in the rest of the industry – most
notably on two counts.
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Vehicle Output is now at Record Levels
First, the Korean vehicle manufacturers have in fact managed to regain all
the ground lost in 1997/98 and posted a new record for output of over 2.8 million
units in 1999 (see Table 1). Hyundai and Kia accounted for over two-thirds of
this total and even beleaguered Daewoo managed an output of over three-quarters
of a million units in 1999.
Foreign Influx into the Component Sector
Second, the industry has been undergoing a wide-ranging restructuring, especially
within its component supply sector. No fewer than forty new foreign joint ventures
have been formed over the last 2-3 years as overseas companies took advantage
of the weakened position of their Korean counterparts. Some former industry
leaders have fallen by the wayside – most notably the Halla Mando group, whose
broadly based component portfolio has been dispersed, mostly into new foreign
ownership. Also Daewoo Auto Components, which had been in joint venture with
Delphi, is now under the 100% control of this American global player.
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By GlobalDataInevitably, this change of ownership of a large part of the component industry
is breaking down the ‘keiretsu’-style supply chain structures that were the
norm in the industry. More open supplier relationships are expected to develop.
Also the introduction of new technologies from abroad will be more straightforward
with the foreign equity participation in the industry. (Table 2 below).
VMs are coming under Foreign Control
At vehicle manufacturer level, the trend is also strongly towards the globalisation
of the Korean industry. Daewoo is now almost certain to become part of Ford,
while its Ssangyong subsidiary may well be sold off to DaimlerChrysler. Samsung’s
car and commercial vehicle operations seem to heading towards becoming part
of Renault’s growing international presence. That only leaves the biggest player,
Hyundai, which now also controls Kia and Asia, in Korean ownership. As the world
of auto manufacturing gets ever smaller, perhaps it cannot be too long before
Hyundai also teams up with a global player?
So where will all the restructuring lead? Korea has proved its ability to grow
its vehicle industry behind protective barriers though the 1980/90s and has
recovered from recession in record time.
KGP Research Conclusions
Work conducted by KGP over the last six months in Korea suggests that the country
should become an even more important base for automotive manufacturing in future
and that foreign companies should secure a position there before it is too late.
| Table 1: Korea Vehicle Output 1994 – 99 (‘000) |
||||||
|
1994
|
1995
|
1996
|
1997
|
1998
|
1999
|
|
| Cars |
1,806
|
2,003
|
2,265
|
2,308
|
1,625
|
2,362
|
| CVs |
506
|
523
|
548
|
510
|
329
|
481
|
| Total |
2,312
|
2,526
|
2,813
|
2,818
|
1,954
|
2,843
|
| Table 2: Selected Component Companies Investing in Korea 1998/1999 |
||
| Company | Partner(s) | Products |
| Bosch | Camco, Bosch | ABS, DC Motor |
| Delphi | Sungwoo, Daewoo | Air bags, seatbelts, shocks |
| Eaton | Eaton | Solenoid valves |
| Federal Mogul | F M Korea | Bearings |
| GKN | GKN Korea | CV joints |
| Mahle | Donghyun | Filters |
| Siemens | EMS | Fuel injection systems |
| SKF | CCR | Oil seals |
| TRW | Wooojijn | Air vents |
| Valeo | Mando | Electronics |
| Wabco | Mando | Truck brakes |
