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Auto components

Korea’s auto parts makers post record revenues in 2020

But the industry’s shift towards future mobility has polarized sales

By Jul 14, 2021 (Gmt+09:00)

(Courtesy of Hyundai Motor Group)
(Courtesy of Hyundai Motor Group)

South Korea’s auto components makers posted another year of strong sales in the global market last year, according to the Detroit-based Automotive News.  

The Automotive News Top 100 Global Suppliers List released last month stated that a total of nine Korean auto parts makers were ranked in the top 100 firms in terms of revenue last year. The number of Korean firms on the list has steadily climbed every year, from only five firms in 2018 and eight in 2019.

But Korea was still behind the US and Japan, each of which had 23 firms included in the most recent list, as well as Germany with 18 firms.  

By company, Hyundai Mobis Co. was ranked seventh last year with sales of $25.07 billion, behind its global rivals such as Robert Bosch GmbH and Denso Corp. Hyundai Mobis, a traditional auto parts maker, has lately been diversifying into future mobility areas such as software and platforms.

“We have chosen to wholly transform the core of our business, instead of making gradual changes in limited areas,” said a Hyundai Mobis representative.

Others in the top 100 were Hyundai Transys at 34th, Hyundai Wia at 38th, Hanon Systems at 39th, Mando Corporation at 50th, SL Corporation at 77th, Yura Corporation at 78th, Seoyon E-Hwa Co. at 85th and Hyundai Kefico at 89th.

Hyundai Wia’s Russian factory was completed in 2020.
Hyundai Wia’s Russian factory was completed in 2020.

Yura Corporation was the only Korean company to have newly entered the list. Yura, a wiring harness maker, expects further growth in sales this year as electric vehicles (EVs) use more wires than traditional combustion engine cars.

Auto industry experts highlighted that the electrification of vehicles and the expansion of self-driving systems are key factors driving the rapid growth of related companies.

For instance, Korea’s leading car headlamps maker SL Corporation, was able to move up 12 places in the ranking, from 89th to 77th in just one year, thanks to the growing popularity of its LED lamps in a wider range of future-oriented vehicles. SL holds a 68.3% share of Korea’s car headlamp market.  

“In preparation for the era of autonomous vehicles, we are developing a sensor-based technology that allows drivers to check the car’s front area through headlamps,” said an SL Corporation official.

Likewise, Hanon Systems, the world’s second-largest thermal management systems supplier with 13% market share, is currently constructing its fifth plant in Korea in Gyeongju to supply eco-friendly solutions to about 300,000 EVs annually by 2024.

Hanon Systems factory in Portugal
Hanon Systems factory in Portugal

At the same time, Mando is focusing on developing advanced driver assistance systems (ADAS) technologies including 4D automotive radar sensing for autonomous vehicles. Mando will split its autonomous driving business unit into a separate company in September, with aims to reach annual revenue of 9 trillion won ($7.8 billion).

Another auto parts maker in Korea outside the top 100 list enjoying strong global presence is automotive plastics manufacturer CEPLA Co., the key supplier of plastic components to General Motors (GM) Korea. CEPLA supplies up to 60% of all plastics used in GM Korea’s vehicles.

CEPLA’s plastic materials used in cars
CEPLA’s plastic materials used in cars

The small plastics maker with slightly over 50 employees recently received industry watchers’ attention by supplying 2,000 tons of plastic materials to GM’s US headquarters from April to June as per the automaker’s request.

GM in the US had difficulties in securing plastics locally due to the impact of the winter storm in February. Sources report that GM’s CEO Mary Barra herself wrote a thank-you e-mail to CEPLA Chairman Chae Chang-won for supplying plastics after an urgent request.

FUTURE MOBILITY TRANSITION FUELS POLARIZATION AMONG MAKERS

Despite the growing success of South Korea’s major auto components makers in the global market, industry experts note that others that failed to shift their focus towards future mobility have failed to survive.

According to Korea Auto Industries Cooperative Association (KAICA), the number of auto components makers last year that were primary subcontractors, meaning they supply their products directly to the automakers in Korea, was down to 744 companies from 824 in 2019. The decrease marks the largest number since the association started collecting the data from 2013.

The experts highlight that the companies that make combustion engine components, exhaust systems and fuel gauge systems are especially hard hit by the industry-wide transition to future mobility. The industry estimates that EVs use 22-28% fewer components than traditional internal combustion engine vehicles that use up to 30,000 different parts.

“The automakers are already reducing order volumes of the parts used only in combustion engine vehicles,” said a CEO of a mid-sized auto components maker.

Facing such a major shift in industry focus, South Korea’s government pledged last month to help around 1,000 auto parts manufacturers by 2030 to enable their successful transformation as key suppliers of future automobiles.

At the same, however, others note that domestic auto parts makers must implement restructuring measures themselves to streamline their business segments.

“Some 20% of the US auto components makers, which underwent painful restructuring, can produce parts used in eco-friendly vehicles. The figure is only 5% among Korean firms. They need a similar level of restructuring,” said Researcher Lee Hang-goo of the Korea Automotive Technology Institute (KATECH).

Write to Hyung-kyu Kim and Il-Gue Kim at khk@hankyung.com

Daniel Cho edited this article.

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