"Excessive NDC Targets Pose Greater Shock Than Tariffs... Industry Needs a Calibrated Pace for Protection"

[Interview] Taekseong Lee, Chairman of the Korea Automobile Industry Cooperative
Parts Industry Faces Compound Crisis: Tariffs, Yellow Envelope Act, and NDC
Concerns Over "All-Electric Vehicle" Policy Shocking the Parts Ecosystem
Need for Policy Balance Considering Industry Sustainability and Real-World Conditions

"With the resolution of the 15% tariff issue between Korea and the United States, the parts industry has at least gained some time to regroup. However, the excessive Nationally Determined Contribution (NDC) targets for greenhouse gas reduction will deliver an even greater shock than tariffs."

Taekseong Lee, Chairman of the Korea Automobile Industry Cooperative (pictured), expressed strong concerns in an interview with The Asia Business Daily on October 30 regarding the government's "2035 Greenhouse Gas Reduction Target (NDC)" plan for the transportation sector. He pointed out that, on top of the lingering effects of U.S. tariffs and the implementation of the Yellow Envelope Act earlier this year, the setting of excessive NDC targets has plunged the parts industry into a complex set of difficulties.

Chairman Lee warned, "If excessive NDC targets that do not take into account the current realities are enforced as they are, it could result in structural damage that surpasses the impact of tariffs."

Taekseong Lee, Chairman of the Korea Automobile Industry Cooperative. Provided by the Korea Automobile Industry Cooperative

The shift from internal combustion engines to electric vehicles is an irreversible trend, and the parts industry is in agreement with this direction. However, the issue lies in the speed and manner of this transition. He noted, "Since electric vehicles require fewer parts, there are projections that up to 30% of parts suppliers could disappear," and expressed concern that, "If the transition to electric vehicles is accelerated without sufficient market demand and infrastructure in place, it could lead to a chain of business failures rather than a natural restructuring process."

He also warned that the aftershocks of tariff-related variables must not be overlooked. While the trend of increasing local procurement of parts in the United States is unavoidable, he pointed out that this could rapidly weaken the domestic production base.

He said, "Entering the U.S. market requires at least two to three years of preparation and significant costs, which many companies are struggling with," adding, "Except for some primary suppliers, the reality is that secondary to quaternary parts suppliers have limited financial, human, and technological resources." He went on to emphasize, "Even a 20% to 30% reduction in domestic production volume could cause some companies to collapse under the burden of fixed costs. Even if localization is pursued, there must be sufficient domestic supply volume and policy safeguards in place to maintain the domestic supply chain."

He argued that to minimize short-term shocks, the NDC targets should recognize a variety of propulsion energies-including hybrids, plug-in hybrids, and e-fuels (carbon-neutral synthetic fuels for internal combustion engines)-in addition to electric and hydrogen vehicles. He stated, "Segmented targets should be set in consideration of demand, infrastructure, and power supply conditions, and a soft-landing package should be prepared, including support for research and development (R&D), smart factories, finance, and workforce."

Chairman Lee emphasized, "Europe is also adjusting its targets, and Japan is maintaining a multi-pronged strategy with hybrids and other approaches. While we cannot afford to fall behind in the electrification race, it is crucial to take a realistic and balanced approach that considers the sustainability of the industry."