SEOUL, KOREA – The Korea Automobile Manufacturers Association selected and announced the Top 10 news on Korea’s Automobile Industry of 2012.
Despite the economic recession which began in Europe and higher oil prices, Korea’s automobile industry has achieved record-high exports of 3.2 million cars and $71.8 billion in sales of cars and auto parts, while reaching 4.5 million and 3.6 million production targets in both domestic and international markets respectively, thanks to the improved quality of domestic cars and the Korea-EU FTA and the KORUS FTA.
The Top 10 News on Korea’s Automobile Industry of 2012 are as follows.
Hitting a record high in exports of cars and auto parts
Despite the 2012 EU financial crisis and the global recession, Korea’s car exports are expected to reach the highest level of 3.2 million cars, which amounts to $71.8 billion which includes sales of auto parts. This continuous rise in car exports is thought to be due to the efforts to improve the quality, diversify the export markets, increase higher value-added products, and the price competitiveness and foreign relations improved by the ratification of the Korea-EU FTA and the KORUS FTA.
The KORUS FTA to take effect
After a series of negotiations last December, 2010 and lots of controversy over its efficiency, the FTA between Korea and the US finally took effect on March 15th, 2012. The ratification instantly eliminated tariffs (up to 4%) on auto parts imports and boosted car production, leading to a significant rise in auto parts exports to the US, up 14.4% (as of March to October). Major exports include gear boxes, auto parts, steering wheels, and other parts.
Drop in the sales of domestic cars
As the aftermath of the economic recession shrank both domestic and international economy and consumer sentiment, leading to soaring global oil prices, the sales of domestic cars are expected to reach only 1.4 million, down 5.1% from the previous year, indicating that the car sales are showing signs of declining for the first time in four years after 2008.
Boosting the quality and brand value of domestic cars
Hyundai Motors ranked 53th and Kia Motors 87th for the first time in Best 100 Global Brands of 2012 released by Interbrand, the world’s biggest consulting firm. It is noteworthy that National Highway Traffic Safety Administration (NHTSA) selected GM Korea Chevrolet Aveo as the safest compact car on earth.
Agreement on the two day-shift system
The labor union and management of domestic auto manufacturers agreed to implement the two day-shift system. The previous shift system had two teams work 10 hours in day and night shifts, but under the two day-shift system, the first shift team works 8 hours while the second works for 9 hours in a row. The implementation of this new system makes it possible to shorten daily working hours from 20 hours to 17 hours, eliminating ‘all-night work’. While shortening the operating hours, the system keeps the output level unchanged by improving the productivity and continuing to invest in facilities.
Amid higher oil prices, the sales of compact and hybrid cars soared to an all-time high
The sales of compact cars from January to November, 2012 rose to 187,000, up 12.1 % compared to a year earlier, while those of hybrid cars increased to 27,000, up 85.4% from the previous year, which contrasts with a 5.1% drop in the overall domestic demand. Sales of compact cars are expected to reach a record high, as they feature low maintenance costs and KIA Motors has newly released the latest hit compact car,‘RAY’.
The advent of ‘Automobile-IT Convergence Smart Car Era’
With the technology and production convergence between the auto manufacturers and IT companies actively under way, more comfortable, safer, and eco-friendly cars are coming out in the market. Smart cars equipped with state-of-the-art safety systems, such as Blind Spot Detecting System (BSDS) and Lane Departure Warning System (LDWS), and the new infortainment system Smart Connect, such as Blue Link and UVO, are being unveiled. Many cars are quickly transformed into smart cars which are connected to the outside network.
Building the global production network
With the completion of constructing Hyundai Motor Brazil (HMB) in Sao Paulo, Brazil, which will manufacture 150,000 cars every year, the global production network has been established to make the world, including Europe, North America, Asia, and South America, more interconnected with each other. This network is expected to pave the way for making more successful and effective inroads into the global auto market.
Imported cars to hold 10% of the domestic car market for the first time
Sales of imported cars are expected to reach 132,000, up 20.1 % from the previous year, reaching 10% of the domestic car market for the first time this year. This significant growth is thought to be due in part to the improved price competitiveness of imported cars caused by strong won, releases of brand-new models and diesel-powered cars, expansion of the sales network, and the effects of the FTA.
A rising sense of CSR among car makers
Many auto manufacturers are actively involved in Corporate Social Responsibility (CSR) activities. A good example is Hyundai Motors which has been engaged in philanthropic activities under the slogan of ‘Moving Together’, such as making a 20 billion-won contribution for the needy. KIA Motors donated 5 billion won to the children who lost their parents to car accidents, while GM Korea contributed 10 tons of kimchi and 35 cars to social welfare facilities. Renault Samsung Motors is now carrying on its campaign called ‘Safe Road, Safety for the Children’, and SSANGYONG Motors established ‘Hanmaum Scholarship Association’ in an effort to cultivate local human resources.
