Automotive Industry "Unbearable Business Environment... Urgent Need for Drastic Efforts"

Automobile Industry Association Development Forum Held
"Supply Chain Disruptions... Facing Economic Recession Crisis"

Jung Manki, Chairman of the Korea Automobile Manufacturers Association. / Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Kiho Sung] The automotive industry has claimed that "recent changes in the domestic and global economic environment have worsened the business environment to an unbearable extent, making urgent and extraordinary efforts from not only the industry and workers but also the government essential."

The Korea Automobile Industry Association (KAIA) held the 27th Automobile Industry Development Forum both offline and online at the Automobile Hall on the 14th under the theme "Resolving Difficulties and Measures in the Automotive Industry Due to Changes in the Economic Environment," conveying the industry's hardships.

In his opening remarks, KAIA Chairman Manki Chung said, "The global supply chain disruptions caused by COVID-19, the surge in energy, grain, and raw material prices due to the Russia-Ukraine war, and the inflation driven by supply factors have led countries worldwide to respond to the quantitative easing from COVID-19 with quantitative tightening and interest rate hikes. As a result, the global economy is now facing stagflation and an economic recession crisis unprecedented in recent decades." He added, "Now is the time when not only business owners and workers but also the government need to make extraordinary efforts such as low-interest rates and financial facilitation targeting the manufacturing sector to overcome this crisis."

He emphasized, "Considering that most regulations are created by the National Assembly, fundamentally, when introducing a new regulation, the British-style 'One in Two or Three out' system, which mandates abolishing two or three existing regulations for every new one, should be introduced in the legislative process. For immediate problem-solving, a 'Regulatory Reform Special Committee' should be established within the National Assembly to enable our companies to respond flexibly to worsening external environmental changes."

Research Fellow Cheol Cho from the Korea Institute for Industrial Economics and Trade stated in his keynote presentation, "Despite the US-China conflict and the impact of COVID-19, global supply chain dependence on China has deepened," and argued, "The high dependence on China for secondary battery materials and raw materials, which are core components of electric vehicles, is problematic."

He added, "In this situation, as the US-China conflict intensifies, global supply chain issues have become even more critical for us, given our high dependence on China," and stressed, "Going forward, it is necessary to strengthen the domestic supply ecosystem and diversify supply chain regions."

Juhong Kim, Director of the KAMA Policy Research Institute, mentioned in his keynote presentation, "The automotive industry is facing financial difficulties due to semiconductor shortages, global supply chain disruptions, difficulties in securing raw materials, increased burdens from rising prices, and rising logistics costs caused by prolonged logistics issues," noting that polarization among companies has also intensified during this process.

He urged, "To overcome the crisis, it is necessary to ▲ enhance the roles of the government and financial institutions to help parts suppliers overcome short-term liquidity crises, ▲ improve production flexibility by supplementing systems considering intermittent instability in parts procurement, and resolve labor-management conflicts such as the Cargo Solidarity strike, and ▲ implement policies to stimulate consumer demand to counteract domestic demand contraction caused by stagflation."

Professor Seongsu Lee of Soongsil University stated in his keynote presentation, "There is a global shortage of semiconductors, especially vehicle semiconductors, which are experiencing severe supply and demand difficulties, leading to a significant decrease in domestic and international automobile production volumes," and predicted, "The shortage of vehicle semiconductors will last at least two to three years."

He argued, "Strategic nurturing of vehicle semiconductors is necessary, and it is essential to establish design and production infrastructure domestically to provide stable vehicle semiconductors to domestic automakers," adding, "Multifaceted support such as policies, funding, and manpower is needed to foster domestic vehicle semiconductor specialized companies."

During a discussion chaired by Professor Ingyo Jung of Inha University, Professor Byungjo Kim of Korea University Business School diagnosed, "The increased demand for information and communication products due to COVID-19 is a major cause of the semiconductor supply chain crisis," and predicted, "The prolonged Russia-Ukraine war will worsen global supply chain problems, which will last at least two to three years."

As a solution, Professor Kim mentioned, "It is necessary to promote the rapidly spreading sharing economy model globally in Korea as well, exploring ways to reduce production burdens through efficient resource sharing," emphasizing, "Long-term investment in the semiconductor sector is needed, and establishing semiconductor departments and nurturing specialized personnel will be positive in the long term."

Team Leader Inseon Lee of the Strategic Materials Management Institute stated, "Due to the US-China trade dispute and the Russia-Ukraine situation, international economic sanctions and export controls on China and Russia have intensified, significantly shrinking the global supply chain and negatively impacting Korea's automotive industry," adding, "Economic sanctions and export controls are mainly applied in manufacturing sectors such as semiconductors, shipbuilding, and automobiles, and are likely to expand to the 4th Industrial Revolution fields such as AI, quantum computers, and 3D printers. Therefore, continuous attention to economic security is essential as a critical factor for national competitiveness."

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