"Support Measures Needed for Auto Parts Industry Transitioning to Future Cars"

[Asia Economy Reporter Changhwan Lee] As auto parts companies are restructuring their businesses toward future vehicles, there is a claim that the government should establish a business restructuring support system tailored to conditions and characteristics, as the companies' own capacity to respond is limited.

The Korea Automotive Research Institute announced in a report on the 17th that the number of business restructuring approvals for auto parts companies last year totaled 22 cases, a significant increase compared to 2 cases from 2016 to 2019.

It is analyzed that parts companies can utilize incentives such as funding, tax benefits, and research and development (R&D) support when they receive business restructuring approval, leading to active preparation for business restructuring mainly among some large and medium-sized parts companies.

The Ministry of Trade, Industry and Energy set a goal through the future vehicle diffusion and market preemption strategy announced in October last year and the 4th Basic Plan for Eco-friendly Vehicles announced in February this year to convert 500 parts companies to future vehicles by 2025 and 1,000 by 2030.

Parts companies are developing future vehicle business restructuring based on the environment and characteristics each company faces.

A business restructuring method that draws attention is advancing core technologies applied to existing parts to enter similar future vehicle fields. For example, Woojin Industrial, which produces oxygen and exhaust temperature sensors, plans to produce hydrogen pressure sensors; Dongyang Piston, which produces engine pistons, plans to produce fuel cell housings and stack parts; and Inzi Controls, which produces engine cooling parts, plans to produce integrated thermal control modules for hydrogen vehicles.

There is also a method of investing large-scale funds to switch main production items. DSC, which produces seat frames, switched its main production items to busbars for electric vehicle batteries and wireless power transfer modules, and Webasto Holdings shifted from sunroofs to electric vehicle battery systems.

Additionally, there were cases such as Yuratek and Sambo Motors, large parts companies that jointly promote business restructuring in connection with related partner companies.

However, the institute stated that the parts industry still lacks sufficient capacity to respond to future vehicles due to the impact of COVID-19, vehicle semiconductor supply shortages, and soaring steel prices.

Therefore, while it is important for parts companies to voluntarily establish mid- to long-term future vehicle response strategies by utilizing various financial, technological, and consulting projects from the Ministry of Trade, Industry and Energy, it is advised that government policies be designed so that parts companies can receive practical support according to company size, subcontracting stage, and production sector characteristics.

Kim Seyup, senior researcher at the Korea Automotive Research Institute, emphasized, "It is also necessary to establish a system that can induce future vehicle conversion jointly by first-tier parts companies and second- to third-tier small and medium-sized parts companies in a partnership relationship by utilizing the vertical structure among parts companies."