Due to COVID-19 Impact, Half of Car Parts Companies Report Over 20% Sales Decline in Q1

[Asia Economy Reporter Suyeon Woo] Due to the impact of the novel coronavirus infection (COVID-19), about half of domestic automobile parts companies have suffered sales losses of more than 20%. In addition, most companies are experiencing liquidity difficulties and are appealing for active government support.

According to the results of the 'COVID-19 Related Survey' conducted by the Korea Automobile Manufacturers Association on 96 domestic automobile parts companies on the 29th, half (50%) of the respondents said that their sales in the first quarter of this year decreased by more than 20% due to the impact of COVID-19.

Looking at the detailed items, 27.1% of companies responded that their sales in the first quarter of this year decreased by more than 30%, 22.9% decreased by 20% or more but less than 30%, 19.8% decreased by 10% or more but less than 20%, and 22.9% decreased by 1% or more but less than 10%.

As of March, the factory operating rate of domestic automobile parts companies also showed a significant decline. Companies with an operating rate below 50% accounted for 6.3% of all respondents, those maintaining an operating rate of 50-70% accounted for 29.2%, and those with a 70-90% operating rate accounted for 47.7%, about half.

[Image source=Yonhap News]

As many as 93.8% of companies responded that they are experiencing liquidity difficulties, and more than half said that the necessary operating funds to overcome the crisis are 'less than 5 billion KRW'. The factors causing the liquidity crisis were cited in order as sales losses due to demand contraction (69.5%), instability of operating funds such as labor costs (41.1%), and some companies also pointed out difficulties such as unstable operation of overseas local factories (33.7%) and decrease in overseas export volume (15.8%).

As suggestions to overcome this, 72.6% of companies mentioned the need for government support for operating funds, and there were also mentions of additional loans and maturity extensions (50.5%), and deferral of tax payments such as corporate tax and value-added tax (24.2%).

Jung Manki, chairman of the Korea Automobile Manufacturers Association, emphasized, "As the COVID-19 crisis spreads globally to the US, Europe, and other regions, the crisis of our parts companies is deepening," adding, "There is a need to strengthen the government's active role such as rapid support for liquidity loans, deferral or reduction of various tax payments, expansion of public procurement to promote domestic demand, and expansion of employment retention support."

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