Damage Amounting to 1.5 Trillion Won... This Week Is a Turning Point for Domestic Cars Receiving Parts

[Asia Economy Reporter Kiho Sung] As the impact of the novel coronavirus infection sweeps across the globe, the damage to the domestic automobile industry is snowballing, reaching 1.5 trillion won. Fortunately, some factories in China have started producing parts, and from the 10th, some shipments are scheduled to arrive in Korea via air and sea, providing some relief. However, the industry views that more time is needed for full normalization. Therefore, this week is expected to be a turning point for the domestic automobile industry in overcoming the novel coronavirus infection.

According to the automobile industry on the 10th, 'wiring harnesses' produced in China and Vietnam are scheduled for urgent import into Korea. An industry official said, "Some shipments are expected to arrive today," adding, "The government is actively working to prevent delays in customs clearance, so the parts are expected to be delivered directly to domestic partner factories."

He continued, "However, the quantity and models of the incoming parts need to be confirmed after receiving the goods." Since wiring harnesses differ in shape depending on the car model, the operation of complete vehicle factories could be affected depending on which parts arrive.

The domestic automobile industry has been directly hit as factories have continued to shut down due to the novel coronavirus infection. According to the industry, the shutdowns caused by the infection are expected to result in damage worth 1.5 trillion won. In the case of Hyundai Motor Company, all factories were halted for five days, causing production losses of about 30,000 vehicles. This figure was calculated based on the average daily production of 6,224 units in February last year. Using this method, the total production disruption for Hyundai, Kia Motors, SsangYong Motor, and Renault Samsung Motors during the shutdown period is predicted to be around 45,000 vehicles.

However, as the Chinese government approved the operation of some wiring harness factories in Shandong Province under quarantine conditions, there is hope that the shutdown period for popular models will not be prolonged.

A Hyundai Motor official explained, "About 20 factories producing wiring harnesses in China have been operating at a pilot level since the end of last week," adding, "We are making efforts to increase the operating rate."

Therefore, this week is expected to be a turning point for the domestic complete vehicle industry’s shutdown period. On the 11th, Hyundai Motor’s Ulsan Plant 2, which produces the Palisade and GV80, as well as Kia Motors’ Hwaseong Plant, which manufactures the K series, plan to resume operations. Other factories are scheduled to reopen on the 12th. Hyundai and Kia’s Chinese factories will restart on the 17th.

If domestic complete vehicle manufacturers only implement the planned shutdowns and promptly return to normal operations, the worst-case scenario, such as delays in customer deliveries, can likely be avoided.

The key factors are the operating status of factories in China and logistics conditions. An industry official said, "I understand that Hyundai’s Chinese factories are not operating at 100%. Also, there is a reluctance among Chinese employees to go to work due to the novel coronavirus infection," adding, "Even if factories operate fully, the current logistics situation in China is uncertain, so we need to monitor the situation further."

Diversifying parts imports is one of the lessons learned from this incident. According to the Comprehensive Information Network for Materials and Parts and the Korea International Trade Association, last year, the import dependency on Chinese-made wiring (wiring devices) used in automobiles and aircraft was 87%.

Ja-il Lee, a researcher at Eugene Investment & Securities, emphasized, "The wiring harness in question is not a part with high technical difficulty, so it is not a component for which supply diversification is difficult," adding, "The shortage is immediate for products that can be directly installed in specific models, not a structural problem."

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