The Ranking of Car Manufacturing Countries Changed by COVID-19... Korea Ranks 4th in the World for the First Time

Korea Produces 1.62 Million Units in First Half of Year, Ranking 4th After China, US, and Japan
COVID-19 Likely to Disrupt the Four-Power Structure of China, US, Japan, and Germany
Attention on Whether Korea Will Maintain 4th Place in Annual Production
Essential Issues to Address: Quarantine, Labor Union Risks, and Supply Chain Inspection

[Asia Economy Reporter Su-yeon Woo] As the novel coronavirus disease (COVID-19) reshaped the rankings of global automobile manufacturing countries, South Korea entered the 4th place for the first time in the first half of this year. The four-power system of China, the United States, Japan, and Germany, which had dominated since COVID-19, has collapsed, and expectations are rising that South Korea, which has maintained stable production, will rapidly emerge as one of the four major automobile manufacturing powers.

According to the Korea Automobile Manufacturers Association on the 7th, South Korea produced 1,627,643 vehicles in the first half of this year, a 19.8% decrease compared to the same period last year, ranking 4th among global automobile manufacturing countries. This is the first time South Korea has ranked 4th since statistics began to be compiled in 2001. China ranked 1st with 10,087,798 vehicles produced, followed by the United States (3,480,823 units) in 2nd place, and Japan (3,097,292 units) in 3rd.

◆The Global Automobile Production Landscape Changed by COVID-19= Until the early 2000s, South Korea consistently maintained the 5th position in global automobile manufacturing, surpassing France. However, with emerging countries rapidly rising as global production bases in the mid-2010s, South Korea lost the 5th place to India in 2016 and slipped to 7th place after falling behind Mexico, which took 6th place in 2018.

However, the COVID-19 pandemic that struck the world in the first half of this year changed the global automobile production landscape. The four-power system of China, the United States, Japan, and Germany, which had been firmly maintained since the early 2000s, collapsed, and South Korea rose to 4th place. In particular, as the operating rates of European factories severely affected by COVID-19 in the second quarter dropped, Germany fell to 5th place, and South Korea took its place.

South Korean automobile factories briefly halted operations for one to two weeks in February due to a shortage of wiring harnesses from China, but aside from this, most factories maintained normal operations in the first half of this year. The domestic factory operating rates of Hyundai and Kia in the first half were 86.8% and 79.5%, respectively, showing a relatively strong performance compared to overseas factories operating below 50%. However, due to the sharp decline in global demand caused by COVID-19, it seems difficult for South Korea to exceed 4 million vehicles in production this year, following last year. According to the Hyundai Motor Global Management Research Institute, the global automobile market is expected to be in the low 70 million units range this year, showing a decrease of about 20% compared to last year.

◆To Maintain Top 4 Status, Korea Must Ensure Disease Control and Parts Supply Chain Inspection= Experts point out that to maintain this top 4 status on an annual basis, South Korea needs to pay special attention to COVID-19 prevention, parts supply chain inspection, and labor union risks in the second half of this year.

First, the possibility of production line stoppages due to COVID-19 infections remains in the second half of this year. Given the nature of production jobs where remote work is impossible, strict disease control is an essential condition for factory operation. Domestic automakers such as Hyundai and Kia are currently strengthening disease control by staggering employee meal times, controlling external access to factories, and producing masks directly for distribution.

The annual summer labor disputes ('Hatu') in the automobile industry are also cited as potential risks for production stoppages. Strikes by labor unions for wage and collective bargaining negotiations have long been identified as chronic factors causing production rate declines in the Korean automobile industry. Additionally, the unstable domestic automobile parts supply chain due to COVID-19 can directly affect the operation of finished vehicle factories.

Lee Hang-gu, a research fellow at the Korea Automotive Technology Institute, said, "The performance of the domestic parts industry, which had slightly recovered last year, has sharply deteriorated again this year," adding, "If the domestic parts supply chain collapses, it will directly lead to production stoppages and profitability deterioration for domestic finished vehicle manufacturers, posing risks to the entire automobile ecosystem."

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