Automobile Industry Association Requests 10 Trillion Won Liquidity Supply to Address COVID-19 'Demand Cliff'

6 Organizations Hold 'Meeting to Overcome the COVID-19 Crisis'

Hyundai Motor Ulsan Plant Yard (Photo by Yonhap News)

[Asia Economy Reporter Kim Ji-hee] The Automobile Industry Federation is requesting financial support from the government for both automakers and parts suppliers. This is due to the deepening crisis in the industry caused by the global spread of the novel coronavirus infection (COVID-19), which has led to a contraction in domestic and overseas demand and the suspension of operations at overseas factories.

On the 9th, the Automobile Industry Federation held a "Meeting to Overcome the COVID-19 Crisis" to assess the current crisis status of the automobile industry and the difficulties faced by the sector. The meeting was attended by representatives from six affiliated organizations of the federation, including Chung Man-ki, Chairman of the Korea Automobile Manufacturers Association; Oh Won-seok, Chairman of the Korea Automotive Parts Industry Promotion Foundation; Kang Geon-yong, Chairman of the Korean Society of Automotive Engineers; Kim San, Director of the Korea Automobile Industry Cooperative; and Jeong Do-hyun, Head of the Korea Automotive Technology Institute.

At the meeting, it was forecasted that exports would sharply decline starting this month due to the inability to conduct normal sales in major markets such as the U.S. and Europe amid the spread of COVID-19. The domestic industry is also facing difficulties due to shrinking domestic and overseas demand and the suspension of overseas factory operations. In particular, the parts industry saw sales drop by 20-30% last month, with expectations that the decline will widen this month.

Regarding the government's measures related to COVID-19 so far, the federation stated, "The government's multifaceted efforts to support small and medium-sized enterprises, small business owners, individual entrepreneurs, and socially vulnerable groups have been swift and effective." However, it pointed out that "there is relatively no benefit for export companies that generate overseas income and contribute to domestic income and gross national demand, which is problematic." It emphasized that "the government should prepare supplementary measures for export sectors for the sake of domestic sectors such as self-employed businesses and SMEs that it originally aimed to protect."

The Automobile Industry Federation proposed expanding liquidity supply to overcome the crisis, extending tax payment deadlines and easing eligibility requirements, and supporting smooth parts supply. Specifically, it argued that to respond to the global demand cliff, liquidity supply worth 10.6 trillion KRW should be expanded to support automakers and parts companies. This includes the purchase of corporate commercial paper for payments to first- to third-tier suppliers by policy financial institutions (7.2 trillion KRW), expansion of the Korea Credit Guarantee Fund's P-CBO purchase scale (over 1 trillion KRW), liquidity supply support for automakers and automotive-related sectors (7 trillion KRW), and the establishment of financial support policies for automobile exports (15.2 trillion KRW).

It also included a request to defer payment deadlines for corporate tax, value-added tax, individual consumption tax, the four major social insurances, and other taxes for companies in crisis. Additionally, it called for expanding the scale of employment retention subsidies and providing emergency air transport support to ensure smooth parts supply.

To prepare for a surge in demand that may occur after the COVID-19 situation stabilizes, the federation proposed temporarily exempting labor regulations, expanding tax reductions to support corporate competitiveness, and temporarily relaxing environmental regulations.

Meanwhile, the Automobile Industry Federation plans to submit the proposals discussed at the meeting to government ministries, the National Assembly, and the Office for Government Policy Coordination in the near future.

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