Many Korean auto parts companies have stopped production. Will Chinese companies have a chance to enter the Korean market?

   Under the long-term reality of the global epidemic, due to the external demand-oriented industrial direction and the increasingly tight liquidity, the operating conditions of the Korean auto parts industry are becoming increasingly difficult.

       In May, the global automobile market continued to be affected by the epidemic and fluctuated greatly. Passenger car sales in Europe were 654,000, a year-on-year increase of -56.5%; passenger car sales in the United States were 1.112 million, a year-on-year increase of -30.1%, but the month-on-month +56.4% was restored compared to April. Japanese passenger car sales in May amounted to 185,000 units, a year-on-year increase of -46.6%, and the decline expanded. The epidemic still has a relatively large impact on both supply and demand. As the epidemic eased in the Korean market, passenger car sales in May increased by 11.2% year-on-year to 146,000 units, +1.0% month-on-month, returning to normal.

       In view of the bleak outlook for the global automotive industry, the South Korean company of Gates, a global automotive belt manufacturer, announced last week that it will close its Korean plant and withdraw from the Korean market this month. Prior to this, a local Korean company that produced fuse boxes and seat accessories for Hyundai Motor’s Santa Fe and Tucson models also announced the suspension of production.

In May of this year, South Korea’s auto exports fell 54% year-on-year, and auto parts exports dropped by 66.7% year-on-year. According to data from the Korea Automobile Industry Federation, the operating rate of large auto parts companies that directly cooperate with vehicle manufacturers was only 60% in May, and the operating rate of small and medium-sized parts companies that received orders from large auto parts companies dropped to 30. %-40%.

      In general, the operating environment of Korean auto companies and parts companies continues to deteriorate, and the prospects are unclear. Although the world is looking forward to the recovery of the auto industry, it is still a question whether South Korean auto and parts companies can stick to that moment.

      At the same time, China’s auto industry is more optimistic. The China Automobile Association disclosed that China’s auto sales increased by 14.5% in May. Auto retail sales and industrial added value increased in May, but fixed asset investment continued to decline sharply, with a cumulative decline of 23.2% from January to May.

      Many Korean auto parts companies have stopped production. Do Chinese companies have a chance to enter the Korean market?

      Some analysts said that this may be more difficult to achieve. The automobile industry chain has strong regional characteristics, and the upstream and downstream of the industry chain need to complement each other. The impact of the current epidemic on the auto industry is still short-term, and it is not enough to cause a large gap in the relevant parts product market. But in the long run, after the China-Japan-Korea Free Trade Area is reached, Chinese companies still have opportunities.

 


Post time: Jul-29-2020

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