INVESTMENT

OPPORTUNITIES
IN KOREA

AUTO &
AUTO PARTS

INVESTMENT
OPPORTUNITIES
IN KOREA

AUTO &
AUTO PARTS
KOREA,
Where Success Knows No Limits
Contents
04

Industry overview

Koreas auto parts industry

Status of foreign direct investment

12

Prospects and geographical competitive advantages

Locations of Koreas auto parts manufacturers

Competitiveness of the auto parts industry

Promising regions and industrial fields

Outlook for market entry

19

Government policies and regulations

Government policies

22

Cost

24

Success case

Overview
26

Related companies and associations

Related agencies

Major parts companies by function (combustion engine vehicles)

Major green vehicle parts companies by function

05

01 INDUSTRY OVERVIEW

INDUSTRY
OVERVIEW

Koreas auto
parts industry

The auto parts industry of Korea represents 5.6% of the countrys manufacturing-industry
production and 3.4% of the industrys added value. It accounts for 7.7% of Koreas employment.
Koreas auto parts industry has grown from a domestic-oriented industry to one driven by
exports, with the industry share accounting for 4.9% of the countrys total exports and with the
trade balance amounting to USD 21.4 billion.
Status of Korea's automotive industry (2012)
No. of
companies

Employment
(1,000 people)

Production
(KRW billion)*

Added value
(KRW billion)

Exports
(USD million)

Automotive industry

3,869

295

175,221

53,158

76,586

Share in
manufacturing
industry

6.1%

10.9%

11.6%

30.3%

13.7%

Auto parts industry

3,670

208

84,347

16,145

27,406

5.7

7.7

5.6

3.4

4.9

Proportion (%)

Trade
balance
(USD million)
63,825

21,406

* Source: ISTANS Major Industry Trend Index, Korea Institute for Industrial Economics and Trade (KIET)
* Note: 1 ) Exports and trade balance as of 2013
* Note: 2 ) Proportion shows the proportions to the manufacturing industry. Exports Proportion refers to the proportion to total exports.
* Note: 3 ) * KRW 1 billion = USD 908,348. Currency conversion based on March 5, 2015 rate.

Korea is the worlds fifth-largest auto parts manufacturer, following China, Japan, the USA and
Germany.
The global production share of Koreas auto parts industry rose to 3.7% in 2005 from 2.6% in
2000, reaching 5% in 2010.
Auto parts exports rose significantly and the industrys share of global exports increased
sharply as well, from a mere 1.1% in 2000 to 5.2% in 2012.
Hyundai Mobis ranking on the list of the top 100 global suppliers published by Automotive
News rose to sixth in 2013 from eighth in 2012 , with its 2013 sales reaching USD 24.677 billion.

06

AUTO & AUTO PARTS

Global ranking of major auto parts manufacturers

2007

(Unit: USD 100 billion)

2010

2013

Company

Sales Company

Sales Company

Sales

Denso (JP)

37,510 Bosch (DE)

34,565 Bosch (DE)

40,183

Bosch (DE)

34,000 Denso (JP)

32,850 Denso (JP)

35,849

Magna International (CA)

25,645 Continental AG (DE)

24,819 Magna International (CA)

Continental AG (DE)

25,000 Aisin Seiki (JP)

Delphi (USA)

22,283 Magna International (CA)

Hyundai Mobis (27)

Korean
Companies

Mando (76)

07

01 INDUSTRY OVERVIEW

6,074

2,367

Annual sales of the auto parts industry of Korea

Sales (Unit: KRW 100 million)

Classification

OEM

A/S

2009

342,236

2010

440,794

34,375

2011

24,613 Continental AG (DE)

33,500

2012

23,600 Aisin Seiki (JP)

27,125

2013

Hyundai Mobis (9)

14,433 Hyundai Mobis (6)

24,677

Hyundai Wia (45)

3,827 Hyundai Wia (35)

6,741

Mando (53)

4,115 Mando (43)

5,145

Hyundai Dymos (92)

1,338

Hyundai Powertech (54)

3,885

Hyundai Dymos (76)

2,434

* Source: Automotive News

Hyundai Wia ranked 35th, rising three notches and with sales of USD 6.741 billion; Mando 43rd,

rising three spots and with sales of USD 5.145 billion; Hyundai Powertech 54th, rising 16 spots
and with sales of USD 3.885 billion; and Hyundai Dymos 76th, rising 14 spots and with sales of
USD 2.434 billion.
Halla Visteon Climate Control Corporation is not on the list, as it is considered a part of the U.S.
Visteon. Considering the companys total sales of USD 4.738 billion, the company is estimated
to rank 46th.
The global market share of Koreas auto parts manufacturers has risen along with the increased
sales and production of domestic finished-automobile manufacturers, and the rising exports and
local production of auto parts makers.
The global market share of Koreas top 5 auto parts businesses (in terms of annual sales) rose
from 3.2% in 2007 to 5.9% in 2013.

Fluctuation (%)

Exports

Total

20,533

82,689

445,458

-10.2

26,448

121,285

588,527

32.1

516,293

30,978

130,912

678,183

15.2

519,732

30,184

199,443

750,359

10.6

507,352

30,441

210,510

748,303

-0.3

* Source: Korea Auto Industries Coop. Association (KAICA)

While small- and medium-sized enterprises (SME) make up the majority of the auto parts
industry, conglomerates have an absolute advantage in OEM sales, accounting for 78.3% of the
total OEM deliveries in 2013.
This is mainly due to the fact that the conglomerates are at the top of the auto parts supply
chain and thus have benefitted from the growth of the domestic auto and auto parts industry,
mergers and acquisitions in the market and the parts standardization trend created by
modularization and platform integration.
Since the mid-2000s, auto parts exports have been rapidly growing and leading industry growth,
with its growth rate exceeding that of total sales.
Total industry sales have increased 8.6% annually on average while exports have soared 14.9%
over the past five years.
This is due to increased direct exports to global finished-automakers and auto parts
manufacturers, and the increased export of local auto parts due to the expanding overseas
production of Korean finished-automobile manufacturers.
Exports and imports of Koreas automotive parts industry

(Unit: USD mn)

30,000
Trade balance

Status of Koreas auto parts industry

Export

Import

25,000
20,000

Koreas auto parts industry has experienced steady development spurred by the growth of
downstream industries.
The growth of the auto parts industry is attributable to increased unit prices due to
specification improvements; increased overseas production of domestic finished-automobile
manufacturers and increased exports due to the global sourcing trend of foreign finishedautomakers; increased outsourcing and modularization of the finished-automobile
manufacturers; and enhanced role of domestic auto part manufacturers.

15,000
10,000
5,000
0

1997

* Source: KOTIS

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

AUTO & AUTO PARTS

List of major export / import Items of the auto parts industry

Export

09

01 INDUSTRY OVERVIEW

The export growth is mainly due to increased automotive knock-down kit exports to India and
China but also due to a sharp increase in OEM parts exports to overseas manufacturers.

Import

08

HS

Items

8708999000

Other parts and components

8708400000

(Unit: USD 1,000%)

2013

2012
Share

13,579

52.1

13,925

Transmissions (gear boxes)

3,012

11.5

2,529

8708290000

Other auto body parts (excluding seatbelts)

2,689

10.3

2,386

8708940000

Steering wheels and steering boxes

888

3.4

561

8708700000

Road wheels and their parts and accessories

453

1.7

460

8708930000

Clutches and their parts

329

1.3

253

8512900000

Parts of lights or signaling devices

318

1.2

286

8413304000

Fuel pumps

280

1.1

245

8708920000

Silencers (mufflers) and exhaust pipes

265

1.0

270

8511909000

Parts of electric ignition or starting equipment used for internal

combustion engines

131

0.5

135

8708400000

Transmissions (gear boxes)

1,027

21.0

1,057

8708999000

Other parts and components

859

17.6

956

8409992000

Engine parts (diesel)

469

9.6

567

8413304000

Fuel pumps

317

6.5

8708290000

Other auto body parts (except seatbelts)

285

8708940000

Steering wheels and steering boxes

870850

The major export markets of Koreas auto parts industry are the USA, China, Russia, India, Brazil,
the Czech Republic, Slovakia and other countries where Korean finished-automobile makers
have established overseas production facilities.
While the industrys overseas production volume is highest in China, Korea exports most to
the United States (22.9%). This is because the high sales volume of Korean automobiles in the
United States has resulted in great demand for A/S parts.
China is Koreas second-largest auto part export market, following the United States, but the
importance of the Chinese market is relatively low due to localization and other issues.

Status of Koreas auto parts manufacturers

The five leading Korean auto parts companies whose annual sales exceeded KRW 1 trillion
in 2013 are Hyundai Mobis (KRW 17.512 trillion), Hyundai Wia (KRW 6.287 trillion), Hyundai
Powertech (KRW 3.274 trillion), Hyundai Dymos (KRW 1.6040 trillion) and Hyundai Kefico (KRW
1.5030 trillion).
Status of Koreas 10 largest auto parts vendors
Ranking

Vendor

Hyundai Mobis

262

5.8

222

208

4.3

184

Drive-axles with differential gears

136

2.8

8708700000

Road wheels and their parts and accessories

117

8431200000

Parts of fork-lift trucks and other work trucks

8512900000

Parts of lights or signaling devices

(Unit: KRW 1 billion, people)

Turnover

No. of employees

17,512

7,338

Modules and systems

Hyundai Wia

6,287

2,688

Gear boxes, engines, constant velocity

joints, axles

Mando

5,060

4,192

Brake, steering and suspension devices

Hyundai Powertech

3,273

1,800

Gearbox

129

Hyundai Dymos

1,604

1,096

Powertrain, seats

2.4

97

Hyundai Kefico

1,503

1,052

Engine control unit, powertrain control unit

113

2.3

122

1,203

1,940

Brake, steering and powertrain devices

67

1.4

57

Korea Delphi Automotive

Systems Corporation

Heesung Catalysts Corp.

1,107

306

Kyungshin

1,103

1,340

Wiring harnesses, junction boxes

10

Sungwoo Hitech

937

1,246

Bumper rails, door / door side inner

* Source: KOTIS

The list shows that the main auto parts export items are other auto body parts, gear boxes and
clutches and their parts, while the industrys main import items are gear boxes, engine parts and
fuel pumps.
Uncategorized and miscellaneous parts rather than specific unit parts make up the majority
of exports. For example, miscellaneous auto parts accounted for 52.1% of the total exports in
2013, while other auto body parts accounted for 10.3% of total exports the same year.
Despite the increased overseas automobile production, the export of gear boxes, especially
automatic transmissions that are difficult to procure locally, have significantly increased.

Main products

Automotive catalyst

* Source: Korea Enterprise Data (KED)

* Note: Ranking based on 2013 sales

The 10 vendors are large-scale, specialized parts manufacturers equipped with world-class,

advanced technologies. These companies consist of the so-called 0.5 stage partners that
deliver modules for the assembly process and the 1st stage partners that produce gearboxes,
axles and brakes.
Building on their expertise, these companies are expanding trade with global automakers
while striving to increase sales through local production in China, the United States and other
countries.

10

Status of
foreign direct
investment

AUTO & AUTO PARTS

01 INDUSTRY OVERVIEW

Status and trends of foreign investment

As of 2013, 168 of Koreas primary auto parts makers are foreign-invested companies.
Most of the worlds top 10 auto parts makers have invested in Koreas local auto parts industry
and maintain multiple subsidiaries in Korea.
Many of the worlds leading companies have invested in the domestic auto parts industry;
Delphi and Visteon of the United States, Bosch, Siemens and ZF of Germany, Yajaki and Denso
of Japan and Valeo of France.
Foreign-invested companies mainly supply high-tech core parts. The mother companies
strong negotiation power has pushed the operating profit rates of those foreign-invested
companies above the industrys average level.

Automobiles

Auto parts

Amount
invested
No. of
investments
Amount
invested

2008

2009

2010

2011

2012

2013

51,038

10,379

417,352

373,301

3,694

889,391

799,563

74

67

36

44

42

34

40

332,672

287,840

88,481

2,079,611

188,890

254,056

274,941

Advancement of globally leading auto parts manufacturers into Korea

Visteon

USA

Johnson
Controls
Delphi
Lear Corp.

Company (equity share)

Parts / components supplied

Shinhan Valve Ind. Co., Ltd. (25%)

Engine valves

Halla Visteon Climate Control Corp. (69.9%)

Climate control systems, etc.

Visteon Interiors Korea (50.9%)

Built-in modules

Johnson Controls Automotive Interior Korea (100%)

Door trim

Johnson Controls Automotive Korea (100%)

Seats, etc.

Packard Korea (50%)

Wiring harnesses

Korea Delphi Automotive Systems Corporation (50%)

Steering control devices and brakes

Lear Korea (100%)

Seats, etc.

Federal-Mogul Corp. Dongsuh Industrial Co., Ltd. (50%)

Continental
Automotive
Germany
Robert Bosch

Mahle GmbH

Faurecia

Denso
Japan

(Unit: Cases, USD 1,000)

2007

* Source: Ministry of Trade, Industry & Energy

TRW

France

Hitachi Automotive
Systems

Annual foreign investment in local auto parts industry

No. of
investments

Valeo

Engine parts

Continental Automotive Systems Corp. (65%)

Fuel injection devices, electronic

control devices, etc.

Continental Automotive Electronics (65%)

Censors, instrument cluster

Robert Bosch Korea Ltd. (100%)

Engine parts

Robert Bosch Korea Buyong (100%)

Auto motors, etc.

ETAS Korea Co., Ltd. (100%)

Auto embedded systems

Mahle Donghyun Filter Systems Co., Ltd. (100%)

Air filters, cylinder parts

Other

Magna
International Inc.

Company (equity share)

Parts / components supplied

Valeo-Samsung Thermal Systems Co., Ltd.(50%)

Climate control systems

Valeo Pyeong Hwa (50%)

Clutches, friction materials, etc.

Valeo Air-Control Korea (100%)

Alternators, starter motors

Faurecia Emissions Control Systems Korea (100%)

Emission control systems

Faurecia Shin Sung Co., Ltd. (60%)

Instrument panels, consoles

Kwangjin Faurecia (50%)

Door modules

Denso Korea Automotive Corp. (71.0%)

Motors, electric components

Denso Korea Electronics Corp. (100%)

Instrument cluster, HUD

Denso International Korea Corp. (100%)

Sale corporation

Namyang Metals Co., Ltd. (90.8%)

Engine parts, steering and control

devices

Magna Powertrain Korea (100%)

Engine and transmission parts

WIA Magna Powertrain Corp. (50%)

Power train parts

11

Global auto parts giants have advanced into the Korean market in order to use Korea as a key
axis of their global network strategies.
To that end, they have adopted the tactic of holding a majority of the equity shares of the local
auto parts companies they have invested in.
The region has other important auto-manufacturing countries, including Japan and China. But
Korea has been assessed to have strategic significance due to its market size and production
conditions.

12

AUTO & AUTO PARTS

13

02 PROSPECTS AND GEOGRAPHICAL COMPETITIVE ADVANTAGES

Locations of
Koreas auto
parts manufacturers

Koreas auto parts manufacturers are located in the Southwest Belt (Gwangju, Gunsan), West
Coast Belt (metropolitan area) and Southeast Belt (Ulsan).
Car manufacturing plants and primary parts suppliers (Production capacity, Number of companies)
Seoul

Parts suppliers: 38

Incheon
Incheon

Parts suppliers: 63

Sohari
Hwaseong
Pyeongtaek
Gyeonggi Province

Kia: 350K cars

Kia: 600K cars
SsangYong Motor: 250K cars
Parts suppliers: 207

Asan
Seosan
South Chungcheong
Province
Daejeon

Hyundai: 300K cars

Donghee Auto (Kia): 150K cars

Gunsan
Gunsan
North Jeolla Province
Jeonju

Gangwon Province

Parts suppliers: 5

North Chungcheong
Province
North Gyeongsang
Province
Daegu

GM Daewoo: 440K cars

South Gyeongsang
Province
Changwon

Parts suppliers: 27
Parts suppliers: 63
Parts suppliers: 51
Parts suppliers: 143
GM Daewoo: 210K cars

Parts suppliers: 76

Ulsan
Ulsan
Ulsan

Parts suppliers: 8

Busan

GM Daewoo: 260K cars

Tata Daewoo: 20K cars
Parts suppliers: 59
Hyundai: 125K cars

Busan

Renault Samsung Motors:

300K cars
Parts suppliers: 89

Gwangju
Gwangju
South Jeolla Province

Kia: 420K cars

Parts suppliers: 27
Parts suppliers: 8

Car manufacturing plants

Parts suppliers: 37
Daewoo Bus: 10K cars
Hyundai: 1.7mn cars

Southwest Belt
Auto parts makers in the southwestern area form a belt stretching from the GimjeIksanJeongeup
area to the GunsanWanju area, reaching Gwangju.
In North Jeolla Province, large complexes, including the Wanju Industrial Complex 3 (Hyundai

Motor Company), Iksan Industrial Complex 2 (Mando) and Gunsan Industrial Complex (GM
Korea), and parts subcontractors equipped with injection, press, die casting and precision
casting production technologies, are concentrated.
The North Jeolla Province area is also home to manufacturing clusters for passenger
automobiles, commercial vehicles, special vehicles, tractors and agricultural machines.

PROSPECTS AND
GEOGRAPHICAL
COMPETITIVE
ADVANTAGES

Koreas four auto majors Hyundai Motor Company, GM Korea, Tata Daewoo and Kia Motors
are located in the southwest area.
Gunsan, Jeonju and Gwangju of North Jeolla Province account for 17% of Koreas auto
production capacity, with an annual production capacity of 760,000 cars (mainly passenger
and commercial vehicles).
The region accounts for 93% of Koreas medium- and large-sized commercial automobile
production and for all of the medium- and large-sized trucks in Korea.
Kia Motors plants are located in Gwangju, and their annual production capacity is 600,000 cars
(mainly SUVs and CUVs).
South Jeolla Province provides a favorable environment for an auto industry belt because it is
home to auto parts and materials clusters where POSCO (Gwangyang Steelworks), Hyundai
Hysco and other companies in the Yeocheon Petrochemical Complex produce every essential
material, including metal, ceramic and chemicals (plastic).

14

AUTO & AUTO PARTS

West Coast Belt

As the clusters main focus is on manufacturing and production, its R&D innovation network is

rather weak.

The West Coast Auto Industry Belt has been formed in and around Gyeonggi and South
Chungcheong Provinces.
Local auto parts makers, including Hyundai Mobis (Giheung), Mando (Giheung) and Hyundai
Wia (Hwaseong), and globally leading auto parts companies such as Bosch (Germany, Yongin),
Siemens (Germany, Icheon) and Delphi (USA, Giheung) are located in Gyeonggi Province.
The province also accommodates Namyang Research Center of the Hyundai Kia Automotive
Group, the research centers and plants of other major auto parts makers and three of Koreas
six proving grounds located in the Hyundai Namyang Research Center, Kia Joam Research
Center and Korea Transportation Safety Authority Hwaseong Research Center.

Competitiveness of the
auto parts
industry

Quality competitiveness

Technological competitiveness

Japan

Korea

China

Japan

Korea

China

Japan

Korea

China

2012

100

84.2

72.0

100

93.5

74.9

100

91.3

73.9

2004

100

87.5

72.8

100

91.6

73.9

100

87.4

67.0

* Source: KIET, Korea Auto Parts Industry Promotion (KAP)

The quality competitiveness of domestic auto parts makers is rapidly improving, narrowing the
gap with Japan while widening the gap with China.
Koreas quality competitiveness increased from 91.6 in 2004 to 93.5 in 2012 while Chinese auto
parts makers achieved a small increase, from 73.9 to 74.9
This is due to improvements in various areas, including the skill level of workers, production
facility, the level of efficiency in production processing, quality of parts and part design.
As for technological competitiveness, domestic auto parts makers are narrowing their gap with
Japanese counterparts, but they are rapidly being chased by Chinese auto part manufacturers.
Koreas technological competitiveness went up by 3.9 percentage points, from 87.4 in 2004 to
91.3 in 2012, while Chinas technological competitiveness saw a 6.9 percentage point increase,
from 67.0 to 73.9, during the same period.

Southeast Belt

The Ulsan auto cluster is led by conglomerates. It comprises Hyundai Motor and parts
conglomerates that supply parts to Hyundai Motor.
Along with experience and expertise operating auto production facilities, the companies in
the cluster are well equipped with transportation infrastructure, logistics systems and a skilled
labor force.

Although the domestic auto parts industry is more price competitive than that of Japan, the
price gap between Korean and Chinese products is widening.
Korea is narrowing its price competitiveness gap with Japan, recording 87.5% compared to
Japans 100%. However, the difference in price competitiveness between Korea and China has
widened from 12.2% to 14.7%.
Price competitiveness

In Chungcheong Province, auto makers are clustered in the southern part, and the province
ranks third for production capacity in Korea, following Ulsan and Gyeonggi Province in terms of
finished-automobile plants.
78 primary subcontractors, including three major auto parts makers Hyundai Mobis (Asan),
Daihan Climate Control (Cheonan) and Hyundai Powertech (Seosan) are concentrated in the
Cheonan, Asan and Dangjin areas.
The North Chungcheong area is home to Hyundai Autonet and other primary sub-contractors
for automotive electronics. Nine primary sub-contractors, including Halla Visteon Climate
Control Corp, are located in the Daejeon area.

The auto industry in the Southeast Belt is the largest, accounting for 29% of the total domestic
manufacturing companies and 36.7% of the total yield.
Although the three areas in the Southeast Belt the Ulsan, Busan, South Gyeongsang Province
areas maintain close work relations, the Ulsan and South Gyeongsang Province areas in
particular have high self-supply rates.
This is mainly due to the fact that Koreas major finished-automobile manufacturers Hyundai
Motor (the largest domestic automaker), Renault Samsung and GM Korea are all located in
the regions.

15

02 PROSPECTS AND GEOGRAPHICAL COMPETITIVE ADVANTAGES

Promising
regions and
industrial
fields

Promising regions
The Korean government is promoting a synergy effect between the enhancement of regional
innovation capacity and specialization development, through providing support for industryacademia-research institute projects tailored to each regions needs.
For example, the government is promoting convergence parts that use materials in North
Gyeongsang Province; intelligent auto parts in Daegu; green electric vehicle parts in Ulsan; and
untapped areas in the unit parts field, such as quality certification in Busan.

16

AUTO & AUTO PARTS

02 PROSPECTS AND GEOGRAPHICAL COMPETITIVE ADVANTAGES

In addition, the government is providing specialized support to the green automobile design
and convenience system fields in South Chungcheong Province; clean commercial vehicle parts
in North Jeolla Province; clean diesel car parts in Gwangju; and high-end car-tuning parts in
connection with the F1 circuit in South Jeolla Provice.
Regional clusters for automotive parts R&D
Gyeonggi
Province

Green car energy

South
Automotive interior /
Chungcheong
electronic parts
Province
North Jeolla
Province

Green car
commercialization

Gwangju

Clean diesel car

Gwangju

Automotive production
base with 1 mn car
capacity

South Jeolla
Province

MICRO Mobility

South Jeolla
Province

Auto parts sophistication

South Jeolla
Province

Automotive performance
tuning service base

Daegu

Smart car
commercialization

Daegu

Smart green cars

Daegu

Support center for

automotive performance
tuning service

North
Gyeongsang
Province

Convergence automotive
parts

Ulsan

EV components

Busan

Global quality certification

Feasibility study projects

* Source: Ministry of Trade, Industry & Energy

Promising industrial fields

Strengthened regulations on fuel efficiency, environment and safety have accelerated the
development of green vehicles. In order to provide intensive support, the government has
designated 8 core green vehicle parts, which are in urgent need of development due to a
technology gap with advanced countries.
The government plans to achieve 100% domestic development of EV motors, air control
systems, parts weight reduction, batteries and chargers, power train systems for hybrid
vehicles, fuel cell vehicle stacks, core parts for common rail systems and after-treatment
equipment for clean diesel vehicles, etc.
Amid the changing environment of the auto industry, demand for such parts is expected
to grow. The government will continue with its support as part of its plan to advance the
structure of the auto industry.

17

Development plans for green vehicle core parts

Core parts

Development plans

Motor

Develop motor miniaturization design technologies to enhance power density and efficiency

Air control system

Develop parts, including pumps and those for the heating system, to enhance the performance of EV
air conditioning systems

Weight reduction

Develop lightening technologies through optimal design for auto bodies and convenience systems

Battery

Develop battery technologies to increase the one-charge driving range from 140 km to 200 km and
reduce the slow charging time from 6 hours to 3 hours

Charger

Develop home chargers

Develop slow & fast chargers to overcome long-charging-time issues

Power train system

Develop technologies to improve the efficiency of the power train system, which performs as an
intermediate control between a combustion system and a motor ((P)HEV)

Stack

Achieve 100% local production of stacks by 2015

Common rail system

Achieve 100% local production of core clean diesel parts, including common rail core parts and new
material filters for after-treatment system (CDV)

* Source: Ministry of Trade, Industry & Energy

With an increasing number of required auto parts due to strengthened transport safety
regulations, the outlook for such parts is also promising.
A list of parts, including AEB, eCall (Emergency Call), rear view, FCWS and LDWS, is expected to
become mandatory automobile equipment. Small compact cars will be required to have parts
that are currently required only for large vehicles.
Although Koreas auto parts industry has competitive module and system unit part
technologies, it strives to domestically produce core parts and unit parts, including sensors
and auto semiconductors, respectively.
Development efforts to enhance the efficiency of existing combustion engine vehicles are well
underway. Parts related to multi-range transmissions and high-performance small engines are
thus expected to have bright prospects.
Related technologies include a before / after treatment system for combustion engine vehicles,
alternative fuel vehicle technologies, recycling technologies, high-performance engine
technologies and miniaturization and weight reduction technologies.
The outlook is bright for the following parts: Core parts including turbo chargers, which are
necessary for engine downsizing to improve efficiency, and those for direct injection systems;
and parts related to multi-range transmissions to enhance fuel efficiency.
As the price competitiveness and quality of Korean auto parts are well recognized in the global
market, parts with great export potential are also considered promising.
As automobile chassis parts, which are parts for the brake system, suspension system and
steering system, are relatively small and light compared to other parts, chassis parts exports
can be expanded.
The exports of engine and transmission parts are highly likely to grow, as they are also small,
light and equipped with highly competitive domestic technologies.

18

AUTO & AUTO PARTS

19

R&D efforts are significantly important for automotive electronics parts, as the production of
parts is completed only after fine adjustments for example, adjustments on power currents
on each model of vehicles, which takes place after the completion of product development.
Although the competitiveness of domestic parts makers in this field is rather weak now, the
countrys IT competitiveness can enhance the growth of the field.

Outlook for
market entry

The production trend of Korean finished-automobile manufacturers from 2004 to 2013 shows a
drastic increase, from 3.178 million cars (2003) to 4.562 million cars (2012).
Although there have been ups and downs due to the economic recession or strikes, the overall
production trend is on a steep rise.
The current production capacity is reaching its limit due to the long absence of new
production facility establishments, but the global reputation of the domestic auto industry is
being solidified with increased sales through overseas production.
Spurred by the growth of the downstream industry, the domestic auto parts industry is showing
steady growth in terms of revenue.
The domestic auto parts industry is expected to be on the same growth track as its
downstream industry, the automotive industry.
The exterior growth trend is forecast to continue thanks to existing growth contributors
including the increased unit price of sales per vehicle due to improved specifications and
sophistication (OEM revenue), the increased number of domestic vehicles in use (A/S revenue),
the expanded overseas production of domestic companies and the global parts sourcing of
overseas finished-auto makers.
A strong global sourcing trend has translated into the increased deliveries of Korean parts
makers, which are well equipped with high price and quality competitiveness, to global auto
makers.
Domestic parts makers will enjoy great opportunities to participate in the global sourcing
trend, especially with overseas auto makers that are based in Korea.
As domestic auto production is stagnant, with overseas finished-automobile production
exceeding 50% of the total production, the importance of the parts industry in Koreas overall
auto industry will grow.
Expanded overseas production is expected to negatively affect Koreas auto exports. However,
increased parts exports to overseas production facilities run by domestic companies and
global automobile manufacturers are expected to offset such loss.

GOVERNMENT
POLICIES AND
REGULATIONS

20

Government
policies

AUTO & AUTO PARTS

03 GOVERNMENT POLICIES AND REGULATIONS

Policies for future vehicles

Through its Green Vehicle Industry Development Plans, the Korean government has set a 2015
target for the green vehicle industry to produce 1.2 million vehicles, export 900,000 vehicles and
hold 21% of the domestic market share.
R&D support for green vehicles
Category

R&D project

EV

Government
support

Government
support

Category

R&D project

Development of EV
finished-vehicles
KRW 20.5 billion
(2010 -)

Hybrid vehicles

Local production of
power train systems KRW 16 billion
and parts

Hydrogen fuel
vehicle

Development of
systems and parts
(2006 -)

Clean diesel
vehicles

Development of
intake & exhaust
system parts

KRW 10.5 billion

Plug-in hybrid
vehicle

Local production of
KRW 19.6 billion
parts (2008 -)

KRW 14 billion

* Source: The Korea Institute for the Advancement of Technology (KIAT)

In order to lay out the foundation for mass-production, the government has set support

measures for the development of eight green vehicle core parts, establishment of facilities,
market creation and supply base expansion.
The auto industry invested KRW 1.3 trillion from 2006 to 2010 and plans to invest KRW 3.1
trillion from 2011 to 2015.
As for smart vehicles, the government focuses on the creation of new auto-IT industries through
exploring and applying innovative auto-IT technologies while enhancing the competitiveness of
IT SMEs.
In order to support the establishment of an industrial environment for auto-IT convergence,
the government aims to provide one-stop services to help IT companies enter the auto market
through the establishment of a VIC New Biz Center.
A business R&D model, R&BD, has been introduced to minimize market entrance failure and
encourage companies to explore creative business models.
The government provides support for technology development based on policy demand,
private demand, technology roadmaps and patent-related technologies, through exploring
new tasks in the governments project to develop industrial source technologies for IT
convergence.

21

The government promotes the independent development of sensing system technologies

including those for cameras and radars, which are the core parts of automobiles.
In line with safety regulations including mandatory equipment and the New Car Assessment
Program (NCAP), the government aims to secure the competitiveness of surround sensors,
which will be used to prevent accidents by autonomous vehicles (AVs).
I n order to secure global competitiveness, the government supports the domestic
development of technologies related to RFIC, CMOS, image sensors and DPS, along with the
development of convergence censors.

Polices to strengthen the competitiveness of the parts industry

The Korean government actively supports the efforts of domestic auto parts companies to enter
the global market.
The government provides customized support related to technology development, human
resources, finance, consulting and IT solutions, in order to promote and nurture global parts
companies.
In order to support global parts exports, Auto Parts Parks have been established around the
world in Detroit, Frankfurt and Nagoya.
The government aims to support certification parts SMEs through the establishment of the
Automobile Global Quality Certification Center in Busan.
The government also supports the establishment of an industrial environment for SMEs.
The government strives to explore core parts that can be developed by SMEs and expand the
participation of SMEs in conglomerate-led R&D projects.
The government aims to establish a vertical division of labor environment by promoting
new R&D cooperation models, including those that allow a multiple number of demandcorporations, as well as foreign demand-corporations, to participate in government R&D
projects.

22

COST

AUTO & AUTO PARTS

23

04 COST

The chart below shows production cost comparisons between Korea and other countries with a
strong automobile industry. Koreas raw material costs and labor costs are estimated at 68.6 and
4.7, respectively, out of 100.
Koreas auto labor costs have been on the rise, but the countrys absolute level compared to
those of advanced countries, including Japan, Germany and the United States, remains low.
Costs comparison of major auto countries
Korea

Japan

Germany

Mexico

USA

100.0

100.0

100.0

100.0

100.0

68.6

67.8

71.0

59.9

77.6

Fuel costs

0.5

1.0

0.9

0.8

0.5

Outsourcing costs

3.2

3.2

3.2

3.2

3.2

Labor costs

4.7

10.1

13.9

3.3

11.0

Depreciation costs

5.5

4.8

3.7

11.1

4.5

Sales
Raw material costs

* Source: Mizuho Bank. Ltd. of Japan

Compared to Japan, Korea is more actively expanding its FTA network, especially with major
auto markets including the United States, European Union, Canada and Australia. Costs saved
from tariff reduction by FTAs enhance Koreas raw material cost competitiveness.

24

AUTO & AUTO PARTS

05 SUCCESS CASE

SUCCESS CASE

Overview

25

Honeywell entered the Korean market in 1989 as Honeywell Koreas Turbo Operations
established an assembly facility in the Sihwa Industrial Complex in Ansan, Gyeonggi Province.
Honeywell Korea is a foreign-invested corporation based on a full capital investment of USD 3
million by Honeywell. Following the initial establishment of the assembly facility, Honeywell
Korea is currently operating a 3,305-square meter-production facility in the same complex
after relocating and expanding three times.
Honeywell Koreas flagship turbocharger brand is Garrett, which has a dominant market
presence in Korea, with more than 60% of the market share.
The companys major partners are finished-automobile makers including Hyundai-Kia,
Ssangyong and GM Korea. OEM sales account for 90% of the total sales, while the aftermarket
share, including engine tuning, represents about 10%.
Honeywell Turbo Operations run 12 production facilities around the world, including one in
Shanghai.
As for turbochargers, which is Honeywells major focus, the domestic market size is 1.7 million
turbos a year, and Honeywell Korea accounts for more than 50% of the market.
Honeywell Koreas production facility is the 5th largest of Honeywells 12 facilities. Honeywell
evaluates that Koreas manufacturing industry is still strong in advanced parts, including IT and
automobiles. Honeywell reinvests all the profits incurred in Korea, into the Korean market.
Koreas turbocharger market is rapidly expanding, especially since 2005, when the government
started to impose environment-related regulations on diesel vehicles.
The advanced parts business, including IT and auto parts, is not too sensitive to labor costs.
Honeywells Korean facility has been evaluated to outperform the companys Chinese
production facility in terms of sales per capita and productivity.
The turbocharger technology is a core technology for engine downsizing to enhance fuel
efficiency and requires advanced technologies.
As of 2013, diesel vehicles take up 32.7% of the domestic passenger vehicle market, a 17%
increase from the 2008 figure. The market has been growing at 19.1% every year on average
for the past five years, showing great growth potential.
Domestic companies are currently developing related technologies with the aim of massproducing turbochargers after 2016. Thus, the market is expected to grow continuously.
In addition, the aftermarket, including engine tuning, is expected to grow, spurred by the
Korean governments measures to promote the tuning industry.

26

AUTO & AUTO PARTS

06 RELATED COMPANIES AND ASSOCIATIONS

Related
agencies

Name

Website

Major role

Korea Automotive
Technology Institute
(KATECH)

www.katech.re.kr

Established in 1990 to complement insufficient R&D manpower and technologies to

develop high equipment in the auto parts industry, KATECH has been steadily supporting
R&D activities in the industry. KATECH provides comprehensive, systematic support to
promote the development of new technologies through various projects, including those
for the development of next-generation automotive technologies, automobile-based
technologies, future-vehicle technologies and new corporate consignment projects.

Korea Auto Parts Industry

Promotion (KAP)

www.kapkorea.org

As a private, autonomous public corporation for the development of the auto parts industry,
KAP provides support to auto parts companies with regard to technology-related difficulties, the establishment of a quality system and business management, along with offering
information about the overall auto industry.

Korea Auto Industries

Cooperative Association
(KAICA)

www.kaica.or.kr

As a representative association of the auto parts industry, KAICA supports auto parts
companies through proposals to the government and finds export channels for them to
promote the global market entrance of domestic auto parts companies.

www.kama.or.kr

In order to enhance business efficiency to facilitate the countrys auto industry, KAMAs
work includes nurturing the auto industry; responding to trade-related issues; proposing
suggestions for safety-related policies and regulations; and publishing auto-related studies and statistics.

Korea Automobile
Manufacturing Association
(KAMA)

Major parts
companies
by function
(combustion
engine
vehicles)

Function

Category

Major parts

Major companies
Finished-car makers

Engine

Cylinder heads /
blocks

Daedong Metals Co., Ltd., Doosan Infracore Co., Ltd., Yeong Hwa
Metal Co., Ltd.

Pistons

Dong Yang Piston Co., Ltd., Dongsuh Industrial Co., Ltd., Korea
Dongdo Industry Co., Ltd.

Crankshafts,
connecting rods

Daechang Forging Co., Ltd., Korea Flange Co., Ltd., Sammi Metal
Products Co., Ltd.

Camshafts

Yoosung Enterprise Co., Ltd., Leewon Precision Co., Ltd.,

Taechang Enterprise Co., Ltd.

Piston rings, cylinder liners

Yoosung Enterprise Co., Ltd., Korea Piston Ring Inc.

Bellows

SJM Holdings, SDB Bellows Co., Ltd.

Halla Visteon Climate Control Corp., Samsung Climate Control
Co., Ltd., Denso Korea Automotive Corp., Korea Delphi
Automotive Systems Corporation

Power
Generation
Equipment
Cooling system

Fuel system

RELATED
COMPANIES AND
ASSOCIATIONS

27

Intake
& exhaust system

Cooler modules

Radiators,
condensers

Halla Visteon Climate Control Corp, Samsung Climate Control

Co., Ltd., Denso Korea Automotive Corp.

Fan motors

Denso Korea Automotive Corp., DY Corporation

Fan shrouds

Ecoplastic, Dai-han Calsonic Co., Ltd.

Fuel tanks

Sejong Industrial Co., Ltd., Donghee Industrial Co., Ltd.

Fuel pumps / water pumps

JICO, GMB Korea Corp., Myunghwa Ind., Co., Ltd.

Oil pans

SL Corporation, Hwa Shin Co., Ltd.

Intake & exhaust manifolds

Daelim Enterprise, Samjoo Construction Machinery

Silencers /exhaust pipes

Sejong Industrial Co., Ltd., Dongwon Metal Co., Ltd.

Catalytic converters

Sejong Industrial Co., Ltd., Daegi Faurecia, Daeji Metal Co., Ltd.

Throttle bodies

MOTONIC, S&T Motiv

Finished-auto makers, Hyundai Dymos, Hyundai Powertech,
S&T Dynamics

Transmission
Power Train
Equipment
Other
Transmission
Electronics

Levers / hand gears

SL, Kyung Chang Industrial Co., Ltd., SL Corporation

Gears, shafts

S&T Dynamics, Kyung Chang Industrial Co., Ltd.

Oil pumps

Kasco Co., Ltd., Tesma

Propeller shafts

Kasco Co., Ltd., Daesung Co., Ltd.

Pedals (clutches, accelerators, brakes)

Kyung Chang Industrial Co., Ltd., Donghee Precision Co., Ltd.

Clutches / parts

Valeo Pyeong Hwa Co., Ltd., Seojin Automotive

28

AUTO & AUTO PARTS

Function

Category
Panels, frames
Bumpers

Car
body
Door modules

06 RELATED COMPANIES AND ASSOCIATIONS

Major parts

Major companies

Function

Floors, roofs, sides, back panels

Austem Co., Ltd., Sungwoo Hitech, Ilji Tech, Sewon Precision

Battery

Cross / side members

Sejong Industrial Co., Ltd., Hwa Shin Co., Ltd., S&T Motiv, Austem
Co., Ltd.

Wiring

Front / rear bumpers

Brake system

Connectors

Korea Electric Terminal Co., Ltd., THN Corporation

Pyeong Hwa Automotive Co., Ltd., Kwangjin

Motor

ABS, door locks, fans, heaters, power

windows, etc.

Denso Korea Automotive Corp, DY Corporation, Kamco

Sensor

Airbags, heat / temperature, crankshafts,

etc.

Inzi Controls Co., Ltd., Hyundai Kefico, Unick Corporation, S&T

Motiv

Lamps

Headlamps, tail lamps, indoor car lights,

direction indicator lamps, fog lamps

SL Corporation, Seogu Industry Co., Ltd., Shinwoo Co., Ltd.,

Ilhung

Control units

BCU, TCU

Hyundai Kefico, Siemens Automotive, Robert Bosch Korea

Door locks

Pyeong Hwa Automotive Co., Ltd., Daeki Co., Ltd.

Window regulators

Kwangjin, Daeki Co., Ltd., Daeki Co., Ltd.

Door trim system

Ecoplastic, Hanil Company, Hanil E-hwa

Axle assembly

Hyundai Dymos, S&T Dynamics, Korea Flange Co., Ltd.

Axle shafts

Korea Flange Co., Ltd., Hanil Forging Co., Ltd., Daeil Industrial Co.,
Ltd.

Bearings

Iljin Co., Ltd., Schaeffler Korea Corporation

Brake assembly

Hyundai Mobis, Kasco Co., Ltd., Mando Corp., Korea Delphi

Automotive Systems Corporation

Brake linings, pads

Suspension system

Steering system

Cockpit modules

Cockpit modules
Interior &
Exterior
System

Electricity

Exterior

Kasco Co., Ltd., Mando Corp., Namyang Metals Co., Ltd.,

Myunghwa Ind., Co., Ltd.
Sangshin Brake Co., KB Autosys Co., Ltd.
Kasco Co., Ltd., Mando Corp., S&T Motiv

Major green
vehicle parts
companies by
function

Module
Driving parts

Energy storage
parts

Parts

Company

Motors

Hyundai Mobis, Komotek, etc.

Inverters

LSIS Co., Ltd., ADT Caps, etc.

Exclusive engines

Hyundai Motor, etc.

Batteries (inc. BMS)

LG Chem., SK Energy,SB LiMotive

Charging system

LS Cable & System Ltd., KEPCO.

Korea Electric Terminal Co., Ltd., Yura Corporation, LS Cable & System Ltd.

Shock absorbers

Daewon Kangup Co., Ltd., Sammok Kangup Co., Ltd.

Battery charging ports

Springs (coil, leaf),

SL Corporation, Donghee Precision Co., Ltd., Hwa Shin Co., Ltd.

High-voltage harnesses

LS Cable & System Ltd., etc.

Stabilizer bars

Hyundai Wia, Mando Corp., S&T Dynamics, Korea Delphi

Automotive Systems Corporation

Semiconductors

Fairchild, Samsung Electronics, etc.

Converters

Dongah Elecom, GPhilos, ADT Caps, etc.

Control arms

Kwangjin, Daeki Co., Ltd.

Circuit breakers

LSIS Co., Ltd., etc.

Steering System (manual, power)

Hyundai Mobis, Dukyang Ind., Co., Ltd.

Film capacitors

NuinTEK Company, Nesscap

Steering columns / shafts

Mando Corp., S&T Dynamics, Namyang Ind., Co., Ltd.

Electric steering device

Hyundai Mobis, Mando Co., Ltd., etc.

Steering knuckles

Sammi Metal Products Co., Ltd., S&T Dynamics, Namyang Metals

Co., Ltd.

Electric brakes

Hyundai Mobis, Mando Co., Ltd., etc.

Transmissions

Korea Powertrain Co., Ltd., Hyundai Mobis, etc.

Smart seats

Daewon Kangup Co., Ltd., Das Corp., Daewon Sanup Co., Ltd., Hyundai Dymos, Hail E-Hwa

Air conditioning /
cooling system

Halla Visteon Climate Control Corp, Doowon Climate Control Co., Ltd., Donghwan Ind.
Corp., etc.

Electric heaters

Woory Industrial Company, Jahwa Electronics, etc.

Sensors

Daesung Electric, Woory Industrial Company, etc.

Electric pumps

Magna Powertrain Korea Inc., Myunghwa Ind., Co., Ltd., etc.

Motors

Hyundai Mobis, Hyundai Heavy Industries Co., Ltd., Shidae Electric Co., Ltd., Justek Inc., etc.

Inverters

Hyundai Mobis, LSIS Co., Ltd., Young Hwa Tech, Delphi, etc.

Reducers

Hyundai Wia, Hyundai Powertech, etc.

Energy storage system

SK Energy, LG Chem., SB LiMotive, Kokam Co., Ltd., Nexcon Technology, etc.

Chargers

LSIS Co., Ltd., Mando Co., Ltd., Hyundai Mobis, Delphi, Young Hwa Tech Co., Ltd., etc.

High-voltage electronics

Yura Corporation, Kyungshin Corp., LSIS Co., Ltd., Woory Industrial Company, Korea Electric
Terminal Co., Young Hwa Tech Co., Ltd., MJC Korea

Controllers

Hyundai Mobis, Hyundai Kefico, etc.

LDC

Hyundai Mobis, Young Hwa Tech Co., Ltd, etc.

Platforms

Finished-auto makers

Brakes

Mando Co., Ltd., Hyundai Mobis., Delphi, etc.

Air conditioning / cooling

Halla Visteon Climate Control Corporation, Doowon Climate Control Co., Ltd., Hyundai
Mobis, Dai-han Calsonic Co., Ltd., etc.

Design parts

Hanil E-Hwa, Dukyang Ind., Co., Ltd., Das Corp., Hyundai Dymos, etc.

Crash pads

Hyundai Mobis, Dukyang Ind., Co., Ltd., Goryeo Industry Co., Ltd.

Combination meters

Denso Korea Automotive Corp., Unick Corporation

Airbags

Hyundai Mobis, S&T Motiv, Korea Delphi Automotive Systems

Corporation

A/V and navigation system

Hyundai Mobis, Hyundai Autonet Co., Ltd., Bontec Ltd.

Heating and air conditioning system

Halla Visteon Climate Control Corp., Doowon Climate Control Co.,

Ltd., Dai-han Calsonic Co., Ltd., Denso Korea Automotive Corp.

Seats / seat belts

Interior

Hankook, Sebang Global Battery Co., Ltd., Hyundai Enercell,

Ecoplastic, Sungwoo Hitech, Plakor Co., Ltd., LG Chem.

Sungwoo Hitech, Dongwon Metal Co., Ltd.

Disc / drum brakes, wheel hubs

Chassis

Major companies
INFAC Corporation, Kyung Chang Industrial Co., Ltd., Daedong
System

Door frames

Brake boosters

Major parts

Cables

Chassis modules

Axles

Category

29

Electronics
HYBRID

Body /
chassis parts

Common core
parts

Driving parts

Halil E-Hwa, Hanil Company, Daewon Sanup Co., Ltd., Duckboo,

Das Corp.

Consoles, ashtrays,
handles and etc.

Ecoplastic, Dongil Industries Co., Ltd., Ilhung, Korea FT

Corporation

Garnishes, radiator grilles, emblems and

etc.

Ecoplastic, Samshin Chemical Co., Ltd.

Wiper modules

Korea Wiper Blade Co., Ltd., Denso Korea Automotive Corp.,

Fukoku Korea Co., Ltd.

Sunroof modules

Webasto Donghee Co., Ltd.

Wheels / wheel covers

Austem Co., Ltd., Ecoplastic

Energy storage

EV

Electronics /
control (IT)

Body / chassis
Common core
parts

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