'Tearful Inventory Clearance' What to Do with Casper... Hyundai's 'Sore Finger' GGM

Casper barely matched production and sales last year
Clearing inventory with a 17% steep discount
Profitability decline from discounts is Hyundai's burden
Casper EV production and export to start in second half of this year
Need to increase electric vehicle volume and order models to secure profitability

Concerns are growing over the profitability deterioration of Gwangju Global Motors (GGM), established under the government-led 'Gwangju-type job model.' Although last year's inventory was barely cleared through aggressive discount policies, the structure inevitably burdens the profitability of the primary contractor, Hyundai Motor Company. Moreover, ahead of the full-scale transition to electric vehicles this year, costs for workforce expansion and production line modifications are steadily increasing. GGM's strategy is to recover profitability through electric vehicle exports, but uncertainty is growing amid the global slowdown in electric vehicle demand.

According to data from the Korea Automobile Mobility Industry Association (KAMA) on the 6th, last year's domestic sales volume of the Casper was 45,451 units, a 5.3% decrease compared to the previous year. This barely absorbed GGM's annual production volume of 45,000 units in the domestic market last year.

The Casper once accumulated inventory of up to 10,000 units last year, becoming a 'pain point' in Hyundai Motor's lineup, which was recording record-high performance. Ultimately, in November last year, Hyundai Motor cleared the inventory through aggressive discounts of up to 17%. The profitability burden from the discounts was fully borne by Hyundai Motor.

The Casper, produced on consignment by GGM, faces difficulties in flexible production adjustments according to market conditions. This is because Hyundai Motor and GGM pre-set the annual production volume and contract accordingly. While some schedule adjustments are possible, the total annual production volume cannot be reduced.

The Gwangju-type job model is South Korea's first labor-management win-win job creation model led by the Moon Jae-in administration. Instead of companies hiring employees at low wages, the government and local governments support welfare benefits such as housing, welfare, and educational facilities. Since it is fundamentally a model for job creation, the workforce must be gradually increased despite concerns over deficits. On the 5th, GGM also announced recruitment for the first half of this year, seeking a total of 43 people, including 36 technical positions and 7 general positions. This considered the shift from a single shift to a two-shift system once electric vehicle production fully begins in the second half of the year.

GGM is betting its survival on electric vehicle exports for sustainable management. Targeting the European market, where small electric vehicles are popular, increasing Casper EV exports could enable an annual production of 100,000 units. GGM's annual production target for this year is 48,500 units. Among the second half target of 24,500 units, 70% (17,000 units) is planned to be electric vehicles.

However, the recent situation in the European electric vehicle market, including the global market, is challenging. Especially for compact cars with low profit margins, stable profit generation requires an increase in volume. In Europe, a price war is underway due to successive price cuts by major companies such as Tesla and BYD. Therefore, the future success of the Casper EV depends on how competitively priced it can be.

Recently, with the establishment of a corporate labor union within GGM, there are criticisms that the original planning intent of the 'Gwangju-type job model' has become blurred. Lee Hang-gu, director of the Automotive Convergence Technology Institute, said, "The direction of GGM's transition to electric vehicles is correct, but there are limitations to consignment production with just one model," adding, "However, Hyundai Motor is also in a dilemma as it cannot guarantee profitability indefinitely."

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