Hanjayeon "Future Car Required Parts Reduced by Up to 50%... Corporate Support Needed"

[Asia Economy Reporter Yoo Hyun-seok] As the number of parts required for complete vehicle production is expected to decrease by up to 50% compared to conventional internal combustion engines when entering the future car market, there is a claim that the government and automakers should actively support parts companies in transitioning to future cars.

On the 13th, the Korea Automotive Technology Institute (KATRI) stated in its report "Analysis of the Current Status and Implications of Domestic Parts Companies' Preparation for Future Car Transition" that "With the transition to future cars, engine, exhaust, and fuel system parts will disappear, and many power transmission parts will also decrease, resulting in up to a 50% reduction in parts compared to internal combustion engine vehicles."

In particular, it forecasted that the future car market could bring a crisis to parts companies supplying traditional vehicle parts, to the extent that they may have to consider their survival. KATRI explained, "The shift to vehicles such as electric and hydrogen cars that do not use conventional internal combustion engines causes many changes in automotive parts. Naturally, conspicuous parts such as engines, intake and exhaust, and fuel supply will be excluded from electric vehicles, and many changes are also expected in power transmission systems, engine and transmission-related electronic parts, and engine-based air conditioning parts."

Regarding autonomous vehicles, it is expected that there will be no immediate major changes as the current concept is to add safety and convenience functions to existing vehicles. However, after entering the era of Level 4 or higher full autonomy, steering wheels, brakes, and accelerator pedals are predicted to disappear. KATRI also analyzed that after this level, radically different vehicles with completely new frames may be introduced.

KATRI predicted that clusters such as internal combustion engine parts, exhaust systems, and fuel systems will face the highest risks among parts. Conversely, ADAS, sensors, and electric drive systems are expected to have the lowest risks.

KATRI analyzed that Korean parts companies have low preparedness for the future car market. According to KATRI’s independent survey of 10,212 domestic automotive parts companies, those engaged in body parts accounted for the largest number at 1,977 companies (19.4%). Engine-related parts companies numbered 1,469 (14.4%), followed by power transmission device companies at 1,393 (13.6%). Companies specializing in key future car parts were only 104, representing 1.0% of the total. This was also reflected in employment figures. Out of a total of 244,878 employees, 25.5% worked in body parts, 16.0% in power transmission devices, and 13.1% in engine-related parts. The workforce in future car key parts industries was 2,581, accounting for 1.1% of the total.

Sales figures showed a similar trend. The total sales of these companies amounted to 75.547 trillion KRW, with body parts accounting for 18.704 trillion KRW (24.8%), power transmission devices 13.3%, and engine-related parts 12.4%. Sales of key future car parts were only 380.2 billion KRW, representing 0.5% of the total. KATRI explained, "This indicates a lower proportion compared to the number of companies and employees, meaning that sales per company are still low and that significant sales in future car-related sectors have not yet materialized."

KATRI forecasted that over 40% of parts companies will be affected by the transition to future cars. Industries expected to decline due to the transition (engine, power transmission, etc.) account for 43.4% of companies, 44.1% of employees, and 41.6% of sales among all parts companies. In terms of sales scale, small companies with less than 10 billion KRW in sales account for 84.1% of companies and 41.2% of employees. KATRI stated, "Companies at the second tier or beyond in the subcontracting stage account for 88.3% of companies and 68.3% of employees, indicating that the industrial structure is highly susceptible to the impacts of the future car transition."

KATRI emphasized that active support from automakers and the government is necessary as parts companies’ participation is also important for a successful future car transition. KATRI said, "According to annual surveys, smaller companies and lower-tier suppliers still lack preparation for future cars. These companies face many difficulties in independently preparing for the future car era." It added, "Therefore, efforts are being made to encourage joint restructuring where first-tier suppliers and second- to third-tier suppliers collaboratively promote the future car transition."

KATRI noted, "Second- and third-tier suppliers account for 89% of companies and 68% of employment in the domestic parts industry, representing a significant proportion. Whether these companies successfully transition to future cars can have a substantial impact on the national automotive parts industry, which is a structural characteristic." It stressed, "Although vulnerable to the future car transition, second- and third-tier suppliers hold a considerable employment share, so focused support for these suppliers is essential. To this end, comprehensive support from the government, automakers, first-tier suppliers, and related organizations must not be spared."

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