When Hyundai Stops... Parts Suppliers Fear a Domino Shutdown

Hundreds of Hyundai Mobis and Other Partners Hit Hard
Only Wiring Harness Suppliers Running Factories at Full Capacity
If Crisis Prolongs, Kia Motors May Also Shut Down
One Week Halt Could Cost Hyundai 34,000 and Kia 29,000 Units

[Asia Economy Reporter Suyeon Woo] Due to a shortage of parts inventory caused by the novel coronavirus infection (Wuhan pneumonia) situation, Hyundai Motor's domestic and Chinese factories have finally come to a halt, leading to a 'joint shutdown' crisis for hundreds of suppliers, including Hyundai Mobis. Only some companies supplying the parts 'wiring harness' that caused the production stoppage are running their factories at full capacity to secure supply, while the rest have completely stopped work, on high alert for the possibility of a prolonged coronavirus crisis.

According to industry sources on the 5th, Hyundai Motor stopped the production lines of three Genesis models the day before, and from today, the Ulsan Plant 1 lines producing Veloster and Kona have begun a shutdown. On the 6th and 7th, production of popular models such as Palisade, Grandeur, and Sonata, which have customer waiting periods of several months, will also be halted.

Kia Motors, which has secured some wiring harness inventory domestically and internationally, has responded by reducing production per line without shutting down the factory. However, if domestic and overseas suppliers cannot resume normal operations next week, Kia may also begin line-specific shutdowns due to inability to secure additional parts.

Affiliate parts suppliers delivering modules, including Hyundai Mobis, have also simultaneously stopped their factories. Based on the average monthly production volume in the first quarter of last year, if Hyundai Motor and Kia Motors factories halt production for one week, losses of approximately 34,000 and 29,000 vehicles respectively will occur. In the production of one vehicle, which involves organically connected over 30,000 parts, the shortage of the single wiring harness part causes Hyundai Motor's production disruption to exceed 30,000 vehicles within a week. At the same time, other parts for about 30,000 vehicles inevitably accumulate as inventory, directly resulting in losses for suppliers. Especially, small-scale second- and third-tier supplier parts companies suffer several times greater damage.

Due to the novel coronavirus outbreak, the supply of Chinese-made parts was halted, causing some production lines at Hyundai Motor's factory to shut down. On the afternoon of the 4th, workers wearing masks are leaving work at the main gate of Hyundai Motor's factory in Buk-gu, Ulsan City. Photo by Yonhap News

The worst-case scenario Hyundai-Kia Motors has prepared for is a 'prolonged crisis' phase where normal operations at domestic and overseas factories remain difficult next week. To prepare for this, Hyundai Motor's labor and management agreed to devise long-term parts supply measures starting today. They plan to diversify parts suppliers concentrated in China and discuss support measures for second- and third-tier suppliers affected by shutdowns. Some quarters have also raised the possibility of financial support for suppliers to compensate for losses.

There are about 140 parts suppliers that have jointly entered China with Hyundai-Kia Motors, operating around 300 factories nationwide. Including Chinese local suppliers, the scale of automotive parts imported by South Korea from China last year was estimated at $1.204 billion. In particular, dependence on Chinese-made parts for certain labor-intensive handcrafted parts like wiring harnesses exceeds 80%.

This sense of crisis is spreading not only to Hyundai-Kia Motors but also across the entire automotive industry, including SsangYong Motor, Renault Samsung, and GM Korea. Due to wiring harness supply issues, SsangYong Motor has already completely stopped operations since the 4th, and Renault Samsung is considering halting operations for 2 to 3 days starting around the 11th of next week.

Meanwhile, three suppliers?Kyungshin, Yura Corporation, and THN?that supply wiring harnesses to Hyundai-Kia Motors have been running their domestic factories at full capacity since the 3rd. A Yura Corporation official said, "To meet wiring harness part delivery deadlines as much as possible, we have deployed even office staff to the production line and are operating the domestic factory at full capacity. Even if Hyundai Motor temporarily stops domestic factory lines, we cannot rest. We are also considering sourcing parts by air from factories in Vietnam, Europe, and other locations."

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