Government to Foster 1,000 Future Car Parts Companies by 2030 and Train 10,000 Workforce

[Sejong=Asia Economy Reporter Kwon Haeyoung] The government plans to transform 1,000 auto parts companies into future car companies by 2030. To promote business restructuring of parts companies, it will invest 282.6 billion KRW this year to create a dedicated future car fund and train 10,000 specialized personnel by 2025.

On the 10th, the Ministry of Trade, Industry and Energy announced the "Support Strategy for the Transition of Auto Parts Companies to Future Cars" at the 11th Innovation Growth Big 3 Promotion Meeting, which includes these details.

As the automotive industry shifts to future cars, auto parts companies focused on internal combustion engines face a decline in demand. According to a survey by the Korea Automotive Technology Institute, about 47% of auto parts companies and employment (4,195 companies, 108,000 employees) belong to sectors requiring business restructuring, such as engines, power transmission, and internal combustion engine electrical devices. Analysis also suggests that without restructuring, a total of 900 companies will disappear by 2030.

The government, seeing that production and employment in the parts industry have stagnated since 2016 and that individual companies face limitations in transitioning to future car businesses, has prepared comprehensive support measures.

First, the government, automakers, and support organizations will jointly establish a "Future Car Transition Support Platform" to closely assist parts companies in strategy formulation, technology development, financing, and commercialization. The existing "Business Restructuring Support Group" will be expanded and reorganized to provide integrated support for future car development and purchase plans, consulting, finance, sales channels, and commercialization.

A specialized support platform will also be established, led by local governments with participation from regional universities and support organizations. When local governments select specialized fields and establish infrastructure plans, the government will support the construction of testing and certification infrastructure and link workforce training projects at regional universities.

The government plans to expand joint research and development (R&D) and strategic alliances between parts companies and different industries such as information technology (IT) and services by establishing a privately-led "Autonomous Driving Industry Association."

Additionally, the government will focus support on parts and materials development aligned with automakers' new car development strategies. It will create specialized R&D programs for partner companies linked to the new car development strategies of the three mid-sized companies producing hybrid, electric sport utility vehicles (SUVs), and high-efficiency passenger cars. Incentives will also be provided to second- and third-tier suppliers to jointly restructure businesses with large parts companies.

To stabilize the supply chain, the government will support technological independence for 14 key parts of electric and hydrogen vehicles that currently have high overseas dependency and increase the localization rate of electric and hydrogen vehicle materials from the current 70% to 95% by 2025. To this end, 32.9 billion KRW will be invested in automotive material R&D this year.

Furthermore, 11.9 billion KRW will be allocated this year for vehicle semiconductor mass production performance evaluation and inter-company cooperation models, and 20 billion KRW for the localization and advancement of six core autonomous driving components.

Globalization of parts companies will also be supported. KOTRA will establish additional GP (Global Partnering) centers in Silicon Valley, USA, and Munich, Germany, increasing the current five centers to seven. The Korea Automotive Technology Institute plans to open an R&D center in the USA next year.

The government will consider providing low-interest loans for facility investments and mergers and acquisitions (M&A) funds to reduce the investment burden for parts companies transitioning to future cars. Detailed support plans will be announced once the government budget for next year is finalized. Additionally, the government will increase the guarantee limit for securitization companies (P-CBO) supporting small and medium enterprises with reduced sales or low credit ratings and establish a future car fund worth 500 billion KRW.

Legal amendments will also be pursued to allow companies investing in future car facilities to receive foreign investment and local investment subsidies without factory expansion.

Alongside this, a dedicated R&D program for business restructuring will be newly established to support latecomer companies transitioning to future cars, and a total of 10,000 future car personnel will be trained by 2025, including 3,800 advanced researchers and 6,200 field workers.

Meanwhile, based on this strategy, the government plans to support the business restructuring of 1,000 auto parts companies by 2030. Through this, it aims to increase the number of parts companies with sales exceeding 1 trillion KRW from the current 13 to 20 and expand the number of parts companies exporting over 10 million USD from 156 to 250.

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