"Nine Korean Companies Among Top 100 Global Auto Parts Firms... Need for R&D Support Policies"

[Asia Economy Reporter Ki-min Lee] Last year, nine domestic companies, including Hyundai Mobis, were listed among the global top 100 automotive parts suppliers.

It has been pointed out that policy support related to research and development (R&D) is necessary to enable our parts companies to take a leading position in the global automotive market, which is shifting its focus to electric vehicles and autonomous vehicles.

The Korea Automobile Manufacturers Association (KAMA) announced this on the 11th in a report titled "Analysis and Implications of the Global Top 100 Automotive Parts Suppliers."

According to KAMA's report, the ranking by the number of top 100 automotive parts suppliers last year was Japan (23 companies), the United States (22 companies), Germany (18 companies), South Korea (9 companies), and China (8 companies). Compared to 2019, the number of companies in the U.S., South Korea, and China each increased by one, while Japan's number decreased by one. Among the top 10 countries, the United Kingdom dropped one rank.

Among domestic parts companies are Hyundai Mobis (7th), Hyundai Transys (34th), Hyundai Wia (38th), Hanon Systems (39th), Mando (50th), SL (77th), Yura Corporation (78th), Seoyon E-Hwa (85th), and Hyundai Kefico (89th). Among these, Yura Corporation was listed among the global top 100 parts suppliers for the first time.

By country, South Korea and China performed relatively well last year despite COVID-19, thanks to a rapid recovery in domestic demand.

Hyundai Mobis, which ranked 7th among global parts companies for the second consecutive year in 2019, saw its sales decrease by 4.1% last year. Compared to the average decline rate of 7.2% among the top 10 companies, this is considered a relatively strong performance.

By country, South Korean and Chinese parts companies performed relatively well last year despite the impact of the COVID-19 pandemic.

Although the sales of the top 100 parts companies decreased by 10.0% compared to 2019, domestic parts companies saw only a 3.0% decrease, and China experienced a 6.9% increase.

However, the research and development intensity, which indicates the ratio of R&D investment to sales, of domestic parts companies was found to be lower compared to the global top five companies.

The average R&D intensity of the five companies?Bosch, Denso, ZF, Magna, and Aisin?last year rose by 0.7 percentage points from the previous year to 7.2%, whereas the average of the nine domestic companies increased by only 0.1 percentage points to 3.2%.

In particular, Bosch maintained an R&D intensity of 10.5% even in a deficit situation, but most of our companies, including Hyundai Mobis (2.8%), Hyundai Transys (3.1%), Hyundai Wia (0.9%), Hanon Systems (4.9%), Yura Corporation (0.3%), and Hyundai Kefico (4.1%), showed R&D intensities below 5%.

KAMA pointed out that, in addition to the lack of capacity for R&D investment, the relatively low government support such as tax credits for R&D investment compared to major countries is also a factor.

In South Korea, tax credits for R&D investment for large companies are only 0?2% of the investment cost, whereas in Germany it is 25%, and in Japan it ranges from 6% to 10%.

Since parts companies’ sales tend to increase as the proportion of high value-added, electrification, and autonomous driving-related parts rises, KAMA emphasized the need for active business restructuring toward electrification and autonomous driving through M&A, as well as the expansion of financial support for R&D and M&A.

Jung Man-ki, chairman of KAMA, said, "In the process of the global automotive market shifting toward future vehicles such as electric-powered and autonomous vehicles, proactive investment in R&D is crucial not only for the survival of our parts companies but also for market leadership." He added, "In this regard, the government needs to strengthen policy efforts to ensure that R&D support is provided at least at the same level as competing countries by including future vehicle-related R&D and related facility investments in the national core strategic technologies and expanding tax credits."

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