"Automotive Industry Performance Expected to Rebound... Should Seize Opportunity to Expand Overseas Market Share"

Samjong KPMG Publishes Report on 'Automotive Industry Trends and Response Strategies Amid COVID-19'

[Asia Economy Reporter Minji Lee] As the domestic novel coronavirus disease (COVID-19) situation calms down faster compared to North America, Europe, and other regions, the production, domestic demand, and exports of the domestic automobile industry have temporarily recovered. In this context, opinions have emerged that automobile companies should take advantage of the strong dollar situation to expand their market share overseas.

According to the report "Automobile Industry Trends and Response Strategies Due to COVID-19" published by Samjong KPMG on the 20th, the supply and demand in overseas automobile markets are expected to sharply decline due to COVID-19. On the other hand, the domestic automobile market's demand is expected to be highly volatile depending on the course of COVID-19 and the effect of new car launches.

This year, automobile production is expected to decrease by 13.5% from the previous year to 76.89 million units, and sales are also expected to sharply drop by 15.2% to 76.61 million units. This is because the COVID-19 pandemic caused a temporary shutdown of global automobile and auto parts factories and a rapid contraction in demand.

Samjong KPMG stated, "According to global market research institutions, production is expected to rebound from next year due to the base effect, increasing by 13.1% from the previous year to 86.97 million units, and sales will also increase by 12.2% to 85.93 million units, regaining growth momentum. Although the growth rate is expected to slow down in the long term, automobile production and sales are expected to continue increasing, so it is time to establish strategies based on scenarios of either the end or prolongation of COVID-19."

The report particularly explained that domestic automobile companies should seize the opportunity to expand their market share in the U.S. and European markets through active promotions utilizing the strong dollar situation aligned with the end of COVID-19 overseas. This is based on the judgment that it will take considerable time for overseas automobile production bases to recover from the impact of COVID-19.

Additionally, the report predicted that while the domestic automobile industry will face difficulties in production and exports due to COVID-19, the possibility of domestic demand recovery will act as a positive factor, advising companies to strengthen customer relationships through penetration of the domestic market.

In fact, domestic automobile sales in March this year recorded 151,516 units, an increase of 9.1% compared to the previous year, due to reductions in individual consumption tax, new car launches by companies, discount events, and an increase in business days.

However, it warned that if domestic and international automobile demand does not recover in the short term due to the prolonged domestic COVID-19 situation, the entire automobile ecosystem could collapse and enter a long-term recession, urging preparation of a Plan B for this scenario.

The report forecasted that as COVID-19 prolongs, the importance of social values such as health and environment in the automobile industry will be further emphasized. Accordingly, it advised establishing sustainable plans based on social values and building strategic collaboration systems with related stakeholders.

Furthermore, it suggested establishing various emergency management plans for the 'post-COVID-19' era. In the short term, companies should identify risks across operations and supply chains while responding financially by securing cash liquidity and controlling costs and expenses. In the long term, they should not only adjust investment portfolios but also adopt a strategic perspective by rebuilding global supply chains through analysis of future market trends.

Lee Dong-seok, Partner of Strategy Consulting at Samjong KPMG, said, "A new automobile industry ecosystem, unlike any before, will unfold in the deadlock of economic, social, and international relations caused by COVID-19. From a business strategy perspective, scenario-based response plans should be prepared depending on the continuation of COVID-19, and from a management perspective, plans prioritizing steps based on urgency and managerial impact should be established."

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