Last Year, South Korea's Automobile Production Falls Below 4 Million Units

Estimated Annual Production of 3.93 to 3.95 Million Units Last Year
Lowest in 10 Years Since 3.51 Million Units Produced in 2009
Korean Auto Industry Faces Productivity Decline Due to Chronic Labor-Management Conflicts
Expected to Rank 7th Among Auto Manufacturing Countries, Behind Mexico

[Asia Economy Reporter Woo Su-yeon] Last year, South Korea's automobile production volume finally fell below 4 million units. The annual production volume dropping below 4 million units is the first time in 10 years since 2009, and it is expected to rank 7th in the world, one step below Mexico, among the top 10 global automobile manufacturing countries.

According to the industry on the 2nd, South Korea's automobile production volume in 2019 is estimated to be around 3.93 to 3.95 million units, similar to the level during the global financial crisis in 2008 (3,826,600 units). This is the lowest since 2009 (3,512,900 units). With the psychological threshold of 4 million units broken, the sense of crisis in the domestic automobile industry is intensifying.

The background of this production decline lies in the chronic labor-management conflicts within South Korea's automobile industry. Last year alone, major companies such as Renault Samsung Motors, Korea GM, and Kia Motors continued strikes, causing factory operating rates to drop significantly. Since early 2018, Korea GM closed its Gunsan plant, and as stable operation of Renault Samsung's Busan plant became impossible due to ongoing strikes from late 2018, the Renault-Nissan Alliance reduced Nissan Rogue consignment volumes from about 100,000 units annually to 60,000 units. As a result, the hourly production volume at Renault Samsung's Busan plant decreased by 25%.

According to the World Economic Forum, South Korea ranks 130th out of 141 countries in labor-management cooperation competitiveness. Due to a rigid labor market structure, rising labor costs have led to a loss of productivity competitiveness. As stable production becomes difficult domestically, South Korean automobile companies are gradually increasing overseas production focused on emerging countries such as India, Mexico, and the Czech Republic.

Moreover, the domestic market, which accounts for a significant portion of automobile production, has shrunk due to economic recession. The domestic market, which recorded 1.83 million units in 2016, is expected to decrease to around 1.75 million units this year.

Meanwhile, while domestic automobile labor and management are clashing over wage increases and improved working conditions, emerging automobile manufacturing countries are rapidly rising due to cheap labor costs and expanding domestic markets. Looking at the global top 10 automobile manufacturing countries ranking, South Korea fell to 6th place in 2016 after yielding the 5th place to India, and further dropped to 7th place in 2018. In 2019, it is expected to remain 7th, unable to catch up with 6th place Mexico.

An industry official pointed out, "To restore domestic automobile productivity, establishing cooperative labor-management relations is most urgent," adding, "If the current labor-management relations continue, we must consider the possibility of falling out of the global top 10 manufacturing countries within a few years."

This content was produced with the assistance of AI translation services.