Company A, a secondary parts company that manufactures press molds for domestic automakers in Hwaseong, Gyeonggi-do, has been undergoing court rehabilitation procedures since last April. The company, which had been withstanding for 30 years from 1992, could not avoid the influx of bad news. This is due to multiple adverse events, from the shortage of semiconductors to the rise in raw material prices after Corona 19. In addition, the accelerated flow of electric vehicle conversion was also a decisive blow to business deterioration.
The era of electric vehicles is fast approaching, but the domestic auto parts industry has not been sufficiently prepared. There are only a handful of parts makers that properly manufacture electric motors and electronic parts for electric vehicles. As a result, the domestic auto parts industry is expected to achieve the worst performance this year.
According to the Korea Automobile Research Institute and the Automobile Parts Industry Promotion Foundation on the 5th, there are a total of 8,966 domestic auto parts companies employing 10 or more people as of last year, with 235,000 of them employed. This year, the number of employees employed by these companies has decreased to about 225,000. That’s a decrease of 10,000 people in one year.
The domestic auto parts industry has experienced a sharp boom since 2010. In 2010-2015 alone, 100,000 employees and 1,700 companies were added. However, as the number of hybrid vehicles and electric vehicles using batteries and electric motors increased significantly, the momentum of the parts industry began to decline significantly from 2016.
The domestic parts industry, which has focused on internal combustion engine engines instead of electronic parts, has not been able to prepare for rapid industrial upheaval. The number of employees in the parts industry, which reached 265,000 in 2016, has disappeared by 40,000 in five years until this year, and by 10,000 in the last year. An official from the parts maker said, “Even if the business situation is difficult, I cannot say this out loud.” “I am receiving financial support with the cooperation of the government, because the financial sector will collect the loan the moment it says sluggish sales.” The number of parts for an internal combustion engine vehicle is about 30,000, but less than 20,000 for an electric vehicle.
The reduction in parts itself is having a negative impact on the parts industry. Above all, as advanced technology is used in electronic parts such as electric motors, which are the core of electric vehicles, parts makers need to reinvest a certain amount of profits in R&D to create them, but in reality it is insignificant. As of last year, out of 8,966 parts makers, there were 210 companies capable of producing parts for future vehicles, such as electric motors, accounting for only 2.3% of the total. Lee Hang-koo, Senior Research Fellow at the Automobile Research Institute, said, “Middle-sized parts makers are supporting themselves with the money they earned from 2010 to 2015, but other small and medium-sized enterprises are holding on by reducing their workforce. There are fewer than 300 parts makers in Korea, and fewer than 100 companies are investing this amount for three years in a row.”
[서진우 기자 / 화성 = 이새하 기자]
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