Government, Hyundai Motor, and Kia Launch 'Cascading Reduction Model' for Automotive Supply Chain

Agreement Ceremony for Carbon Reduction in the Automotive Supply Chain
Expansion of Carbon-Neutral Facility Investments for SMEs
Cascading Reductions from Finished Vehicle Manufacturers to Tier-1 and Tier-2 Suppliers

The government and Hyundai Motor Company and Kia are joining forces to actively support carbon reduction efforts among automotive parts suppliers. Hyundai Motor Company and Kia will support their primary suppliers, who in turn will assist secondary suppliers, aiming to achieve a cascading reduction effect throughout the supply chain.

Export vehicles are parked at Pyeongtaek Port in Gyeonggi Province. Photo by Yonhap News

On November 17, the Ministry of SMEs and Startups announced that it had held a “Coexistence Agreement Ceremony for Carbon Reduction in the Automotive Supply Chain” in collaboration with the Ministry of Trade, Industry and Energy, Hyundai Motor Company and Kia, automotive parts suppliers, and the Korea Auto Industries Cooperative Association. This initiative is in response to major countries such as the European Union shifting their carbon regulations from a “worksite-based” to a “product-based” standard, making the carbon footprint generated during vehicle production a new regulatory requirement for exports.

The Ministry of SMEs and Startups will expand its support for “carbon-neutral facility investment for SMEs,” which targets small and medium-sized automotive parts companies, to systematically assist with the replacement of high-carbon equipment. The Ministry of Trade, Industry and Energy is also conducting a pilot project this year for four supply chain consortia, including LG Electronics, LG Chem, and LX Hausys. Starting next year, the government plans to significantly broaden the scope of support through the “Industrial Supply Chain Carbon Partnership Project.”

This initiative is structured as a “cascading reduction model” connecting primary and secondary suppliers. The Ministry of Trade, Industry and Energy, together with Hyundai Motor Company and Kia, will first support facility upgrades for primary suppliers. These suppliers will then reinvest the same amount in facility upgrades for their secondary suppliers. Finished vehicle manufacturers such as Hyundai Motor Company and Kia can use the resulting reduction achievements as offset credits under the emissions trading scheme. The government expects that this cascading structure will establish a public-private cooperative reduction model across the entire supply chain.

The government plans to expand the “Supply Chain Carbon Partnership” beyond the automotive sector to include industries such as electronics, steel, petrochemicals, semiconductors, and shipbuilding, thereby strengthening the ability of domestic industries to respond to global carbon regulations.

No Yongseok, First Vice Minister of the Ministry of SMEs and Startups, stated, “As global supply chain carbon regulations are strengthened, efforts to reduce emissions across the entire supply chain are becoming even more important. In particular, we highly value and will actively support the proactive reduction efforts being made at the supply chain level in the automotive industry, where small and medium-sized enterprises make up a large proportion of the parts sector.” Park Dongil, Director General for Industrial Policy at the Ministry of Trade, Industry and Energy, emphasized, “Supply chain reduction is a challenge that cannot be tackled by companies alone. This collaboration will accelerate the green transformation (GX) of the entire industry, going beyond the 2035 NDC.”

Hyundai Motor Company and Kia described this agreement as “a supply chain low-carbon transition model jointly created by the government, businesses, and public institutions,” adding, “We intend to play a catalytic role in sustainable management and the transformation of the industrial ecosystem.”