Automotive Industry "Overseas Business Trips Blocked Due to COVID-19"

[Image source=Yonhap News]

[Asia Economy Reporter Kiho Sung] The automotive industry is reportedly facing difficulties as overseas business trips have been blocked due to the novel coronavirus disease (COVID-19).

The Korea Automobile Manufacturers Association (KAMA) announced on the 20th that various cases and concerns, such as difficulties in overseas business trips and sales losses due to factory shutdowns, have been reported through the 'COVID-19 Corporate Difficulty Support Center.' The 'COVID-19 Corporate Difficulty Support Center' has been operating since the 10th.

According to the association, some of the five completed car manufacturers had planned overseas business trips this month to support overseas product development, but these trips were canceled due to entry restrictions from Korea to Europe, the United States, India, and other countries.

Eight parts suppliers also faced disruptions in their overseas business trip plans related to local corporate activities and are substituting trips with phone calls or video conferences, but they are experiencing considerable difficulties in their work.

The association also reported that companies have expressed concerns about the unstable supply of masks.

Regarding factory operating rates, the completed car industry has seen production recovery, but some parts suppliers are experiencing slower production recovery depending on their scale. According to the association, as of March, the factory operating rates of completed car manufacturers are Hyundai and Kia at 98%, GM Korea at 80?90%, Renault Samsung Motors at 95%, and SsangYong Motor at 80%, nearly recovering to pre-COVID-19 levels.

For parts suppliers, the operating rate of first-tier suppliers is above 90%, which is favorable, but second-tier suppliers are only at 60?70%. However, the operating rate of second-tier suppliers has improved compared to last month.

The parts industry is concerned that as COVID-19 spreads to Europe and the United States, production disruptions due to overseas factory shutdowns, difficulties in parts supply, and shrinking demand in major markets will cause a sharp decline in deliveries and sales.

Jung Manki, chairman of the Korea Automobile Manufacturers Association, stated, "To respond to the global demand cliff caused by the spread of COVID-19, extraordinary measures such as tax reductions, deferred payments, and emergency operating fund support for parts suppliers are necessary."

He added, "During the demand cliff period, factories may close or reduce working hours, but during the subsequent demand surge, it may be necessary to increase weekly working hours without limit. The government and political circles need to anticipate the demand surge and prepare proactive measures."