A report by
Reuters says that South Korea has unveiled a policy package to support its “embattled car parts makers industry”; this includes providing financial support worth over 3.5 trillion won (£2.45 billion) and encouraging the use of electric cars.
In a statement, the Industry Ministry said that — as part of its efforts to provide liquidity — South Korea will launch a new credit guarantee programme for bonds (worth 1 trillion won) issued by parts suppliers, using contributions from the government and car makers.
Furthermore, the government says it plans to extend by one year the maturity of loans (worth about $1 billion) made to local companies supplying parts to General Motors’ South Korean factory.
South Korean auto industry associations welcomed the government’s support plan, with the Korea Automobile Manufacturers Association (
www.kama.or.kr) and the Korea Auto Industries Coop Association (
www.kaica.or.kr) saying in a joint statement: “It is a very timely measure in the current situation, where the auto industry’s crisis is getting real and the number of suppliers in management crisis due to lack of finances and low utilisation rates is rising fast.”
The auto components industry is crucial to the South Korean economy, making up 7% of its gross domestic product and employing 235,000 people — about 7% of the manufacturing sector.
According to government data, the number of loss-making listed auto suppliers had risen to 31 by the third quarter of 2018 (from six in 2015). Moreover, data shows that the average operating margin of suppliers had halved over the same period to 1.8%.
General Motors’ South Korean subsidiary closed one of its plants in the country earlier last year, and top South Korean car maker Hyundai Motor Co saw its profits slump in 2018.
The government said it had raised its target for the use of electric cars in South Korea to 430,000 vehicles by 2022 (from 350,000) in a bid to help parts suppliers find new growth areas, adding that it plans to expand the budget for subsidies relating to electric and hydrogen-powered vehicles next year.