US and Europe COVID-19 'Second Shock' Triggers Car and Battery 'Emergency'

Major Market Exporting 6 out of 10 Complete Vehicles... Battery Industry Also Concerned
Expert "Even If Difficult Now, Must Prepare for Post-Stabilization Phase"

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

[Asia Economy Reporter Kim Ji-hee] The domestic industrial sector is trembling under the second shock of the novel coronavirus disease (COVID-19). Just as the wounds from last month's China-originated COVID-19 crisis have yet to heal, the spread of COVID-19 in major overseas countries is intensifying. In particular, with Europe recently emerging as the highest-risk region and confirmed cases rapidly increasing in the United States, the world's three major markets?China, the United States, and the European Union (EU)?which are the main export stages for our companies, have come within the reach of COVID-19.

The automotive sector is the most concerned about the 'second COVID-19 shock.' While the industry expects that production will not be significantly affected this time, unlike during the previous COVID-19 outbreak in China, there are predictions that exports will suffer considerable damage.

Among domestic automakers, Hyundai Motor Company and Kia Motors operate factories locally in Europe. Hyundai's Nosovice plant in the Czech Republic and Kia's Zilina plant in Slovakia each have an annual production capacity of about 330,000 units, which is relatively small. Although many automotive parts suppliers are located in Italy, where COVID-19 is spreading fastest in Europe, most supply European automakers, so the dependency of domestic companies is not high.

The problem lies in sales. According to the Korea Automobile Manufacturers Association, as of last year, the EU region accounted for more than 20% of the total exports of domestic automakers. In 2019, the total number of vehicles exported from Korea to EU countries was 517,155 units, representing 21.5% of total finished vehicle exports. Including the United States (884,244 units), six out of ten vehicles produced domestically and exported overseas annually head to the U.S. and Europe. These markets have a high proportion of premium model sales, making their importance even greater when measured by export value.

In particular, Italy, one of the five major automotive countries in Europe, leads 12% of European exports. Based on last year's export volume, it ranks third after Germany (89,148 units) and the United Kingdom (88,253 units). The Italian market is expected to experience immediate damage starting this month, as nationwide movement restrictions have been imposed. Locally, forecasts suggest that new car demand in Italy this year will decrease by more than 15% compared to the previous year due to COVID-19.

Europe and the United States have also been considered alternatives to compensate for the sluggish Chinese market, adding to the burden. For Hyundai and Kia, efforts to strengthen product lineups in these markets since 2015 had led to a clear upward trend by last year. In the United States, which was outside the influence of COVID-19 last month, sales increased by 17.9% year-on-year, and in Europe, market share rose to the 7% range in January. Researcher Lim Eun-young of Samsung Securities said, “Hyundai and Kia have offset sluggish sales in the Asia-Middle East region with sales in Europe and the U.S.,” adding, “In the second quarter of this year, global sales are expected to decline due to the combined effects of the spread of COVID-19 in developed countries and weak demand in emerging markets.”

There are also calls to prepare for the post-crisis period, even if the current situation is difficult. Kim Jun-gyu, head of the Trade and Industry Research Office at the Korea Automobile Manufacturers Association, said, “If the COVID-19 crisis ends within a few months, there will be a surge in deferred new car demand,” emphasizing, “It is necessary to continue active investment in securing volume and new car development to avoid falling behind in future competition.”

Since the World Health Organization (WHO) has declared COVID-19 a global pandemic, the aftermath could potentially engulf all industries beyond just the automotive sector. The battery industry is already facing difficulties communicating with local electric vehicle companies in the U.S. and Europe. A battery industry official said, “We have somewhat adapted to this situation, but the COVID-19 crisis is rapidly escalating in the U.S. and Europe, and they seem to be in a panic,” adding, “Society itself appears to be in a temporary state of panic.” SK Innovation is building an additional electric vehicle battery plant in the U.S. and is expanding the second plant under construction in Hungary beyond the original plan.

In the electronics industry, concerns about production disruptions have eased as China enters a stabilization phase, but there is significant anxiety about the possibility of the world's largest consumer market closing. Semiconductor demand may increase due to the expansion of non-face-to-face interactions, but if consumption contraction in developed countries continues, the semiconductor industry is expected to be negatively affected. In particular, short-term demand for smartphones is inevitably expected to decline.

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