"COVID-19 Crisis Puts Auto Industry on Alert... Parts Suppliers Operating at 50-70% Capacity"

On the 11th of last month, vehicles produced at Kia Motors' Gwangju Shipping Office near Pyeongdong Industrial Complex in Gwangsan-gu, Gwangju, were seen waiting to be shipped. (Photo by Yonhap News)

[Asia Economy Reporter Kim Ji-hee] The spread of the novel coronavirus infection (COVID-19) is deepening difficulties in the domestic automobile parts industry, with factory operating rates dropping to about half.

According to the Korea Automobile Industry Association on the 9th, the recent average operating rate of domestic automobile parts companies remains at around 50-70%. This is due to unstable factory operations at finished car manufacturers and some companies adjusting their inventory levels. The association explained that if COVID-19 prolongs, there are concerns about worsening management due to reduced delivery volumes and sales.

The most concerning areas are Daegu and Gyeongbuk regions, where automobile parts companies are densely concentrated. There are 117 and 188 first-tier parts suppliers concentrated in Daegu·Gyeongbuk and Busan·Gyeongnam, respectively. This means nearly 40% of the total 831 first-tier automobile parts suppliers are located in these regions. Therefore, if confirmed COVID-19 cases occur at factories in these areas, a chain reaction of factory shutdowns is inevitable.

In the finished car industry, the situation is improving faster than in the parts industry. Last month, domestic finished car production decreased by 26.4% compared to the same period last year due to disruptions in the supply of Chinese-made wiring harness parts. However, since mid-last month, as parts supply gradually stabilized, domestic factory operating rates have been maintained at 80-90% levels since early this month.

However, the recovery of the parts industry remains slow as some finished car manufacturers have not yet resumed weekday night shifts and weekend overtime work for volume adjustments. This is because if additional COVID-19 confirmed cases occur at finished car factories, operations could stop again at any time.

Accordingly, the Korea Automobile Industry Association announced that it will operate the 'COVID-19 Corporate Difficulty Support Center' starting from the 10th. The center is composed of four organizations affiliated with the Korea Automobile Industry Association (Korea Automobile Manufacturers Association, Korea Automobile Industry Cooperative, Korea Automotive Technology Institute, and Automotive Parts Industry Promotion Foundation) and their members.

Each organization will continuously monitor trends of finished car manufacturers, first-, second-, and third-tier parts suppliers, and parts material-related companies. Specific difficulties reported to the center will be promptly communicated to the government and the National Assembly, and solutions will be sought.

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