The pick-up time can be extended by up to 4 months! South Korea's auto industry is deeply involved in the "lack of core" crisis, when can it be solved?

Author 丨Hu Huiyin

Editor 丨Li Yingliang

Figure Source 丨 Figure worm

The problem of the global "chip shortage" still plagues Korean car companies.

On March 14, due to the shortage of chips, Hyundai Motor Group submitted the latest delivery schedule to dealers in South Korea, extending the delivery time of hyundai and Kia's new models by 1 to 4 months. In addition to the longer pick-up time, the chip shortage has also affected the operation of Hyundai Motor's overseas factories, such as the factory in St. Petersburg, Russia, which has been closed due to lack of cores since March. At present, it seems that the resumption of work in the local factory is still far away.

At the beginning of this year, some South Korean car companies optimistically predicted that the chip shortage would be alleviated in the first half of the year, but now, this estimate will also be subject to the supply of neon gas. It is understood that the Ukrainian neon gas producers affected by the geopolitical situation have interrupted production.

Faced with a shortage of chips, the production and sales of automobiles bore the brunt. Data show that the production and sales of Korean cars in 2021 are lower than in 2020. On the other hand, due to the repeated delays in the departure time of new cars, some consumers choose to buy used cars in order to save waiting time, thus pushing up the price of used cars. The negative effects caused by the "chip shortage" are gradually emerging.

In the context of the lack of cores, what kind of challenges will the Korean auto industry usher in?

The auto industry, which has been choked in the throat by a chip

Judging from the current situation of the South Korean automotive industry, the crisis caused by the "lack of core" has not yet shown signs of subsiding.

Recently, the delivery time of many of Hyundai's and Kia's popular new cars has been extended by 1 to 4 months. In fact, as early as Last May, Hyundai, Kia and other Korean car companies were exposed to a number of new energy models to remove smart parking assistance, electric sliding doors and other functions and configurations to reduce the use of chips. Under the tide of lack of cores, the pace of car companies is getting bigger and bigger.

The "chip famine" has lasted for more than a year and has not been alleviated so far. In this regard, Zhang Xiang, a researcher at the Automotive Industry Innovation Research Center of North China University of Technology, believes that there are multiple factors behind the "lack of core".

"The first is that repeated epidemics have led to insufficient chip production capacity. Secondly, the panic stockpiling of mobile phone manufacturers triggered by the sanctions on Huawei's chips has exacerbated the tension and shortage of semiconductor supplies. Zhang Xiang told the 21st Century Business Herald reporter that the imbalance between supply and demand of chips has intensified, and because the surge in demand for consumer electronics chips after the epidemic has squeezed out the production capacity of some automotive chips, "especially new energy vehicles, more chips than general fuel vehicles, so its impact will be more prominent." ”

In addition, geopolitical tensions threaten the production of neon gas, which is indispensable in the chip manufacturing process. It is understood that the production capacity of two neon gas suppliers located in Ukraine accounts for half of the global production of neon gas. Therefore, some analysts believe that the suspension of insas and Cryoin, the two main neon suppliers in Ukraine today, may exacerbate semiconductor shortages and lead to price increases.

The chain reaction caused by the shortage of chips has exposed the complexity of the supply chain of the automotive industry. In order to alleviate the negative impact of "lack of cores" on the automotive industry, in November last year, South Korea's finance minister revealed at the "Big 3" innovation growth conference that south Korea plans to provide 95.7 billion won (about 491 million yuan) to support the research and development of automotive chips by 2025.

In addition to the government's intervention, today, South Korea's local car companies are also trying to "save themselves". In January, it was reported that South Korea's Hyundai Motor and Samsung Electronics intended to reach a cooperation in the field of automotive chips. It is understood that the two companies have previously cooperated in automotive memory chips, which has also injected a shot in the arm for the automotive market.

Even so, car companies must first solve the problem of the current decline in sales. According to data from The Ministry of Industry, Trade and Industry, South Korea's car sales in 2021 were 1.73 million units, down 8.5% year-on-year. Due to the long time for new cars to leave the warehouse, some consumers directly turned to "immediately desirable" used cars, which directly increased the price of used cars in South Korea. Some analysts believe that if the chip has been affecting the new car market, the inventory is sold out, and the supply of second-hand cars will become a problem.

Exports are no longer rising

Already affected by the continuous impact of "lack of core", coupled with the heating up of the geopolitical situation, the life of South Korean car companies is not good.

On March 8, Hyundai Motor said that the plan to resume work this week at the St. Petersburg plant in Russia, which was suspended due to a shortage of semiconductor chip supply from the 1st of this month, had been postponed. At the same time, with the economic sanctions imposed on Russia by countries such as Europe and the United States, the country's shipping and maritime transport have been affected, resulting in an obstacle to the supply of auto parts, and Hyundai Motor's St. Petersburg production base may be suspended indefinitely.

South Korean car companies, represented by Hyundai Motor, in addition to the stagnation of production in Russian factories, their exports may be seriously affected.

According to data from the Korea Automobile Manufacturers Association, South Korean auto exports to Russia will be $1.5 billion in 2021, and Russia is the third largest market for Korean cars after the United States and China. Therefore, the automobile industry is also considered to be one of the industries most affected by South Korea in the Situation between Russia and Ukraine. The Korea Association of Automobile Manufacturers estimates that if the situation in Ukraine does not cool down, the sales of Korean cars in the Russian market will be reduced by nearly 30% at most.

Automobiles are one of the pillar industries of the Korean economy, and its development has attracted much attention. If South Korean cars suddenly lose the Russian market, it may be worse, because it suffered a double decline in production and sales last year.

According to the Ministry of Industry, Trade and Resources, South Korea's automobile production in 2021 was 3.46 million units, down 1.3% year-on-year, while south Korean car sales in the same period were 1.73 million units, down 8.5% year-on-year. In this context, exports became an area where South Korean cars were given hope for growth.

According to the data, due to the increase in brand awareness of Korean car companies, in 2021, South Korea's automobile exports and total exports were 2.05 million units and 46.47 billion US dollars, respectively, an increase of 8.6% and 24.2% year-on-year, which is the first time since 2012 that South Korea's automobile exports and total exports have increased at the same time. However, in 2022, the trend of export growth has not been maintained. Affected by the shortage of automotive chips and other factors, the production, domestic sales and exports of South Korean automobiles in January this year decreased year-on-year, of which exports decreased by 6.4% year-on-year. This can't help but worry about whether the competitiveness of South Korea's auto exports will decline as a result.

In this regard, Zheng Yi, a senior automotive analyst, told the 21st Century Business Herald that it is normal for exports to fluctuate, "At present, the entire automotive industry is facing a shortage of chips, not only Korean cars, but also car exports from other countries are difficult to be alone." But at the same time, he also said that Korean cars still need to be improved in the export market, especially in the case of poor development in the Chinese market.

The challenge of developing new energy vehicles is not small

Although Korean cars have made great strides in the Chinese market, the momentum of continuous sales growth has come to an abrupt end since 2017. At that time, German, American, and Japanese car companies such as Volkswagen, BMW, Honda, and Nissan, which competed with Korean cars, launched Special Models for the Chinese Market, such as long wheelbase and customized versions, according to the characteristics of Chinese consumers. In addition, GM has placed a forward-looking design center in Shanghai to tailor models for Chinese consumers. In contrast, The movement of Korean car companies such as Hyundai and Kia is slow, and most of them still use the introduction of the original model. As of January 2022, the market share of Korean cars in China is less than 2%.

Unlike the defeat in the Chinese market, the sales of South Korean auto hyundai Kia in the United States in 2021 increased by 21.6% year-on-year, setting a record high, thanks to Hyundai Kia's success in capturing local consumer demand for eco-friendly models.

From the overall data, environmentally friendly vehicles have promoted the overall export performance of Korean automobiles. In 2021, South Korea's exports of hybrid vehicles increased by 71% year-on-year, and the export volume of environmentally friendly vehicles accounted for 20.7% of South Korea's total automobile exports. "Judging from the sales of Korean cars in different countries, it has a certain ability to resist risks." Zheng Yi told reporters.

In the past two years, South Korea has been catching up on the new energy vehicle track that was slightly behind before. Specific performance, as mentioned in the "Future Automobile Industry Development Strategy" released by south Korean officials in 2019, it is expected that by 2030, hydrogen energy vehicles, electric vehicles, and autonomous vehicles will become the main body of the market. However, some people in the industry have expressed concerns about accelerating the shift to electric vehicles.

Lee Heng-joo, a research member of the Korea Automotive Research Institute, said that at present, the inverter of electric vehicles is completely imported, many battery materials also rely on imports, etc., and the parts industry is not ready, "In the case of only 1% of the operating profits of small and medium-sized parts companies, it may not be possible to invest smoothly, and even if you are not careful, it will lead to problems in the internal supply chain." ”

In this regard, Yan Ji, general manager of Jiche Technology Europe, told the 21st Century Business Herald reporter that "before the Korean car did not invest much energy in the development of new energy vehicles, in addition, its hydrogen fuel vehicles are still in its infancy," he believes that Korean cars want to achieve rapid development, need to have further planning for strategic markets, such as comprehensive planning in terms of positioning, price and other aspects, otherwise its share in overseas markets will be greatly challenged.

Editor of this issue Wang Tingting Intern Huang Jingshan