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Korea’s Promising Auto Parts in 2010
Korea’s car exports are expected to hit 2.6 million cars in 2010, up 24% from last year’s 2.1 million cars, according the Korea Automotive Research Institute (KARI). In the same period, domestic car production is forecasted to increase from 3.4 million cars to 3.9 million cars.
Last year, Korean automakers such as Hyundai Motor and Kia Motors have shown a conspicuous accomplishment in overseas sales. For instance, their market share in the U.S. rose to 7.3%. At the same time, their cars have enjoyed brisk sales in the emerging markets in China and India.
As domestic car makers distinguish themselves in overseas sales, the name-recognition of Korean-made automotive parts have rapidly improved on the global market. Domestic automakers’ sustained expansion of their overseas plants has brought about reinforced global production network of Korean automotive parts makers.
Mando Corporatio, for example, set up an auto parts factory last March nearby Hyundai Motor’s Turkey production plant. Due to the new overseas factory’s geographical advantage of easy accessibility to Europe, Mando recently signed a deal with Renault Nissan to annually supply about $8.5 million worth of products.
Affected by the globally spreading economic setback, world-famous automakers such as Mercedes Benz, BMW, Volkswagen, GM and Toyota are desperate to save on costs for parts. As a result, they have been actively investigating opportunities for the purchase of Korean-made parts which have been internationally praised for their high quality and reasonable prices.
Last September, Toyota invited 39 domestic auto parts makers to the headquarters’ office in Tokyo to directly purchase Korea`s competitive parts. In the following month, Volkswagen dispatched a delegation to Korea to contact 25 domestic makers and purchase their high-end parts. A member of the Volkswagen delegation revealed that the company had a plan to expand the number of Korean suppliers from five to 50 in the near future. Volkswagen’s popular passenger car “Golf” has employed Korean-made tires, AV systems, brake systems and room lamps as they are satisfied with their superior quality.
Renault Nissan intends to increase the number of Korean suppliers (first vendors) from 28 to 100 by 2013. In particular, the car maker is paying close attention to domestic makers of secondary batteries since it plans to manufacture electric cars in Korea from 2013. GM and BMW already concluded agreements to purchase secondary batteries from LG Chem and SB LiMotive, respectively. Volkswagen is also under negotiation with the two domestic makers to purchase their secondary batteries.
Korea’s automotive IT product makers have also earned a high reputation in global markets for their advanced technology. The purchasing director of Renault-Samsung Motors describes Korea-made navigation systems and multimedia devices as “top-level global quality.”
Chrysler in the U.S. recently announced that it signed an agreement to buy $2 billion worth of auto parts (front chassis modules and rear chassis modules) from Hyundai Mobis, the largest auto parts manufacturer in Korea with excellent expertise in cutting-edge modules and core components.
Domestic experts in the field forecast that when Korea’s FTAs with the U.S. and the EU take effect, domestic auto parts makers will attain enormous advantages in exporting their products. They analyze that if FTAs with those nations going into effect, Korea’s automobile exports to those regions will sharply increase and consequently bring about snowballing demand from them for domestically-made auto parts.
According to the Korea Auto Industries Coop. Association (KAICA), there are about 6,000 auto parts makers in Korea whose combined annual production volume reaches $41 billion. At the moment, 889 makers are directly supply domestic automakers. KAICA expects Korea’s auto parts export in 2010 to reach $13 billion.
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