Kia Morning and Ray Contract Manufacturer 'Donghee Auto' to Halt Factory Operations Starting Today

Kia Morning (Photo by Kia)

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[Asia Economy Reporter Kim Ji-hee] Donghee Auto's Seosan plant, which produces Kia Motors' compact car Morning on consignment, has entered a temporary shutdown. This is due to blocked export routes to the U.S. and European markets caused by the novel coronavirus disease (COVID-19) outbreak.

According to industry sources on the 6th, Donghee Auto's plant located in Seosan, Chungnam, will halt operations for six days from today until the 13th. Donghee Auto has been exclusively producing Kia's Ray and Morning models on consignment since 2004, with an annual production volume of around 240,000 units. Accordingly, the Seosan plant is expected to operate only 14 days throughout this month.

Donghee Auto produces Ray and Morning models mixed on the same production line (mixed production of two or more products on one line), among which Morning's export ratio is more than twice that of domestic sales. Amid declining popularity of compact cars in both domestic and global markets over recent years, the global spread of COVID-19 has disrupted exports, causing difficulties in securing production volume.

In fact, Morning (export name Picanto) had a total production of 195,516 units last year, with 142,639 units, accounting for 73%, exported. Based on overseas retail sales, Kia's models produced domestically have the highest export ratio. The fact that about half of the exports are concentrated in the European region is also a burden. Last month, total car sales in Europe are estimated to have dropped by more than 50% compared to the previous year, making future export prospects bleak.

Earlier in February, Donghee Auto also halted its plant for over two weeks due to supply issues with Chinese-made wiring harnesses. At that time, the shutdown lasted longer than Kia's domestic plants, directly impacted by COVID-19.

Industry insiders express concerns that the shock of the 'export cliff' may intensify starting with Donghee Auto, the only domestic complete vehicle consignment manufacturer. Lee Hang-gu, senior researcher at the Korea Institute for Industrial Economics & Trade, said, "With demand from Europe and emerging countries virtually nonexistent, it is impossible to continue production indefinitely while accumulating inventory. If the COVID-19 situation prolongs, not only Donghee Auto but also major domestic automakers with much higher export volumes and ratios may sequentially suspend operations or enter temporary shutdowns."

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