"COVID-19, 6 out of 10 Large Companies Face Business Impact... Car Sales Down 14%"

61.8% of Top 1000 Revenue Companies Expected to be Impacted
If Lasting Over 6 Months, Car Sales to Drop 14%, Auto Parts Sales to Decline 13%

Korea Economic Research Institute

[Asia Economy Reporter Dongwoo Lee] #Mid-sized travel agency A has recently been struggling with a flood of travel product cancellation requests. Sales of China travel products have been completely suspended until February, and cancellations for neighboring Southeast Asian region bookings exceed 50%. Most customers say they cannot even pay the penalty fees specified in the terms and conditions. The COVID-19 outbreak is a counterpunch to travel agencies already struggling due to the 2016 THAAD deployment and last year's Korea-Japan conflicts.

#Company B, which supplies parts to Korean automobile manufacturers, has a factory in Sichuan Province, inland China. Recently, transportation within China has practically come to a halt, causing significant difficulties. A B company official said, “It usually takes more than two weeks just to transport to eastern Chinese coastal ports like Shanghai or the Shandong Peninsula, and even if production resumes, it is expected to take considerable time for transportation and exports to normalize,” adding, “We cannot move production facilities immediately, so we are at a standstill,” expressing frustration.

This was revealed in an interview with a Korean businessperson suffering from the aftershocks of the novel coronavirus infection (COVID-19) by the Korea Economic Research Institute. A survey showed that more than six out of ten large companies will be affected by the COVID-19 outbreak. There are calls for more active support for affected companies, including strengthening government export and customs clearance support, expanding financial aid, and loans.

On the 16th, according to a survey conducted by the Korea Economic Research Institute through the market research firm Mono Research targeting the top 1,000 companies by sales, more than half (61.8%) of the responding companies expected COVID-19 to have an adverse effect on management.

If this situation continues for more than six months, like the SARS (November 2002 to July 2003, 9 months) and MERS (May to December 2015, 8 months) outbreaks, annual sales and export volumes are expected to decrease by 8.0% and 9.1%, respectively, with exports to China dropping by 12.7%.

The sales decline rates by major industries were ▲Automobiles -13.9% ▲Auto parts -12.8% ▲Petroleum products -12.4% ▲General machinery -11.0%, in that order. The export decline rates by major industries were ▲Petroleum products -17.8% ▲Automobiles -14.5% ▲General machinery -11.6% ▲Auto parts -11.0% ▲Petrochemicals -10.0%, respectively.

Korea Economic Research Institute

Even if the COVID-19 outbreak subsides within six months, domestic large companies are expected to see average decreases of 3.3% in sales and 5.1% in exports this year. Exports to China are expected to decline by an average of 6.8%.

The sales decline rates by industry were ▲Wireless communication devices -8.4% ▲Automobiles -7.3% ▲Petroleum products -6.0% ▲General machinery -5.9% ▲Auto parts -4.0%, indicating the extent of the impact. The export decline rates by major industries were ▲Petroleum products -10.5% ▲Wireless communication devices -10.1% ▲Automobiles -9.9% ▲General machinery -7.7% ▲Auto parts -4.6%, respectively.

As for companies' responses to the COVID-19 outbreak, the measures were ▲Refraining from business trips to China (34.3%) ▲No particular response (29.5%) ▲Strengthening local quarantine activities (10.5%) ▲Repatriating employees or implementing work-from-home (10.2%) ▲Reducing local business activities (6.7%), in that order.

The government's policy support priorities were ▲Rapid information sharing on domestic and international infection situations (57.0%) ▲Strengthening quarantine systems to prevent spread (21.2%) ▲Intergovernmental cooperation to support business activities (9.5%) ▲Support for export companies in Greater China (6.4%) ▲Expanding consumption and investment capacity of economic agents (6.0%), respectively.

Yoo Hwan-ik, Head of Innovation Growth at the Korea Economic Research Institute, said, "Among companies with production facilities in China, 83.9% are expected to be adversely affected by this situation," adding, "Large companies such as Samsung and Hyundai Motor Group are supporting their partner companies with emergency funds and engaging in win-win cooperation, but the government must also take more active measures to support affected companies by strengthening export and customs clearance support, expanding financial aid and loans."

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