Korea’s auto market highlights technological advances, high-quality parts production

May 2, 2017
Achieving official certification levels for automotive exports and imports is a high priority, strongly encouraged and aided by the Korean government. In 2016 the Ministry of Land, Infrastructure and Transport (MOLIT) signed on with NSF International to adhere to its auto parts evaluation and certification standards.

South Korea’s orderly cultural flair for engineering innovations, precise assembly line protocols and superior supply chain organization has propelled the nation to a No. 5 ranking in global automotive production.

Industry-leading inroads into electric vehicle battery technologies and a country-wide commitment to manufacturing highly functional and affordable auto components of all types have combined to deliver an expansive international marketing presence.

Kim Yong Geun, president and CEO of the Korea Automobile Manufacturers Association (KAMA), explains that “we are trying to shift the paradigm from fast-follower to leader-with-creativity.” 

There are 883 auto parts manufacturing firms in Korea, per KAMA figures tabulated in 2015, including four new market entries during the year. Domestic parts production employs some 295,000 people, and in 2015 Korean operations were inaugurated by 14 overseas direct-importers. Within Asia, “Korea” is the preferred term for South Korea. North Korea is commonly called the DPRK, as in the Democratic People’s Republic of Korea.

Korea ranks No. 12 in the world for manufacturing OEM components; it is 18th in aftermarket parts production volume. 

Achieving official certification levels for automotive exports and imports is a high priority, strongly encouraged and aided by the Korean government. In 2016 the Ministry of Land, Infrastructure and Transport (MOLIT) signed on with NSF International to adhere to its auto parts evaluation and certification standards.

“We expect that as we develop this well-structured certification program, high-quality aftermarket parts can be distributed,” both domestically and internationally, says Seok-Won Kim, an industry executive who assisted in facilitating the arrangement. NSF compliance is also desired for imported parts entering the country.

An agreement with the Certified Automotive Parts Association (CAPA) was enacted in 2014. “This means that CAPA-certified manufacturers are ready to go when it comes to supplying high-quality parts to the Korean market,” says CAPA executive director Jack Gillis.

“The replacement part certification system,” observes Kim Yong Seog, MOLIT’s director general, “will help broaden customers’ options as well as reduce repair costs while promoting small- and medium-sized automobile part manufacturers.”

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A wide variety of homologation services from SGS Transportation have been assisting Korean companies in their quest to meet assorted international certification and governmental regulatory requirements – especially for products destined for the United States, according to marketing manager Amanda Hoffman. SGS’ programs can also be applied to parts manufactured elsewhere for export into Korea.

Delphi entered Korea in 1984, growing to include two wholly owned operations, three joint ventures and a technical center specializing in advanced research regarding vehicle electronics, powertrain systems and other innovations.

The company has been honored with the Ministry of Knowledge Economy’s (MKE) prestigious Export Tower Award, recognizing “significant milestones in the value of goods exported out of Korea.” An additional MKE commendation salutes Delphi’s “continued contributions and investment to grow Korea’s economy and contribute to the country’s globalization efforts.”

Owned by Korea’s SK conglomerate, Speedmate manufactures, distributes, imports and exports OE-equivalent aftermarket parts. It is also the country’s largest auto service provider with some 750 mechanical repair shops, plus collision repair shops, tire centers and a network of 3,000 gasoline and propane stations. More than 7 million Korean drivers annually patronize Speedmate’s locations.

Promoting U.S. trade

Supported by the Korean government, the Korea Trade-Investment Promotion Agency (KOTRA) has a network of 100 locations in 70 countries, including an office in Los Angeles “dedicated to assist and support U.S. companies who wish to do business with Korean companies.”

Trade show exhibits are arranged along with providing a Business Incubation Service and marketing/sales support to Korean enterprises “to help U.S. buyers to get quality products at the most competitive prices.”

KOTRA’s national business development manager, Tae Kim, explains to Aftermarket Business World that “we are already planning PR efforts focusing primarily on our Pavilion exhibitors” for this fall’s AAPEX Show during Aftermarket Week in Las Vegas. Sixty-eight companies displayed their wares at the AAPEX 2016 Korea Pavilion.

The Korea International Trade Association’s (KITA) World Trade Academy has been offering its “Car Parts Export Specialist Program” since 2015 to educate Korean students about the details of reaching out to overseas auto industry executives. Instruction in foreign languages is provided along with a rigorous vehicle-oriented marketing professional curriculum.

Electrifying expertise

Among the nearly 200 global exhibitors at this year’s edition of the biennial Seoul Motor Show, Hanon Systems highlighted its latest thermal and energy management technologies designed for furthering the development of electric, hybrid, fuel cell and autonomous vehicles along with updated gasoline/diesel HVAC and powertrain applications.

“As a global automotive supplier headquartered in Korea, this is an important event to showcase our technical expertise and innovative solutions in a public way,” says Hanon President and CEO In-Young Lee.

Writing in Business Korea, journalist Choi Mun-hee reports that the 2017 Chevrolet Bolt EV exhibit by General Motors Korea electrified numerous Seoul Motor Show attendees who took note that the battery system is produced by the chemical unit of Korea’s own LG Corp.

LG’s low-profile engineering of the battery – spanning across the floorboard with new cell and chemistry developments that require a smaller cooling apparatus – allows the car to fit five passengers along with providing a large cargo area behind the back seat.

“The flat-pack orientation offered the flexibility to make the most of the proportions while creating a clean, sculpted design,” explains Stuart Norris, GM Korea’s design director. “All of this additional space gave us a lot of opportunities to play with creative design and storage solutions.”

“LG Chem’s battery business and technology have been world-widely acknowledged once again as our products are continuously being installed by major automobile makers – from their commodity brands to premium vehicles,” says LG divisional president Young Soo Kwon. “LG Chem will continue to lead the EV battery market with differentiated technology to make us stand up as global No.1 battery manufacturer.”

The overall international EV battery market is expected to reach $18.2 billion by 2020, and in addition to GM, Volkswagen, Ford, Hyundai/Kia, Renault, Audi and Daimler all use LG EV batteries.

In a nation that is thoroughly embracing the concept of drastically reduced exhaust emissions, one out of every three EVs on Korea’s roads is an SM3 Z.E. all-electric mid-sized sedan produced by Renault Samsung Motors (RSM) at its Busan, Korea plant.

The automaker “draws its strength from French-style management combined with the high-tech expertise of Samsung and its Korean corporate culture,” says spokesman Romain Gibaud.

Generous governmental incentives (a free charger along with reduced parking fees and a lower “congestion charge,” etc.) promote EV purchases, and the SM3 Z.E. is Korea’s official government vehicle and Seoul’s official EV taxi.

RSM has rolled out EV pilot programs in 16 cities along with establishing 226 EV after-sales locations plus a battery repair center on Jeju Island.

Hyundai-Kia is the globe’s No. 5 ranked automaker, and as you might expect it dominates Korea’s domestic marketplace with 70 percent of the nation’s auto purchases. Worldwide last year Hyundai sold 4.8 million vehicles as its Kia affiliate produced a little over 3 million units.

The sprawling Hyundai-Kia plant in Ulsan is the world’s largest integrated vehicle manufacturing facility, with an annual capacity of 1.6 million units.

Korea’s SsangYong Motor, established in 1954 and acquired by India’s Mahindra & Mahindra in 2011, set a company record for global sales in 2016 by selling 155,844 vehicles and posting its first profit since 2007. “This year,” says SsangYong CEO Choi Johng-sik, “we will successfully launch the large-sized premium SUV Y400 and expand our product lineup to further increase our sales and continue the profitable trend.”

SsangYong’s main Korean plant in Pyeongtaek is joined by factories in Russia, Ukraine and Kazakhstan.

Tesla imports arrive

In March Tesla entered the Korean market by opening two showrooms in Hanan and Gangnam amid implementing an initial network of 25 charging stations at upscale shopping centers. Already there is a six-month waiting list for dealership test drives, prompting some Korean customers to simply order the car outright as the shipping time from the U.S. is shorter.

According to the Korea Automobile Importers & Distributors Association (KAIDA), last year Korean drivers bought 225,279 imported cars, representing a 7.6 percent drop from the 243,900 import registrations recorded in 2015.

Mercedes-Benz posted the highest amount of 2016 overseas purchases with 56,343 units, followed by BMW (48,459), Audi (16,718), Volkswagen (13,178), Ford/Lincoln (11,220), Land Rover (10,601), Lexus (10,594), Toyota (9,265), MINI (8,632), Honda (6,636), Chrysler/Jeep (5,959), Nissan (5,733), Volvo (5,206), Jaguar (3,798), Peugeot (3,622), Infiniti (3,201), Porsche (3,187), Cadillac (1,102), Citroen (924), Fiat (658), Bentley (170), Rolls-Royce (53), and Lamborghini (20).

The best-selling imported models in 2016 were the BMW 520d (7,910), the Mercedes-Benz E 300 (6,169) and the Lexus ES300h (6,112).

KAIDA forecasts that 2017’s import figures will experience an approximate 4 percent increase, topping 238,000 units.

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