Massive Support for Business Partners
Hyundai Motor Group has decided to spend about 5 trillion won to provide comprehensive support to parts suppliers, which are facing difficulties under the so-called “three highs” –- a high won/dollar exchange rate, a high interest rate and high inflation.
The group will announce the large-scale support plan on Oct. 19. In 2018, it laid out a plan to provide a total of 1.67 trillion won to parts suppliers over five years.
The main goal of the support plan is to provide emergency funding to business partners to ease their business difficulties, support their R&D activities for electric vehicles and future car parts, and strengthen win-win ecosystems with partners. As parts suppliers’ difficulties are piling up under the "three highs," the group's support plan is expected to be like a long-awaited rain that puts an end to a drought.
Hyundai Motor Co. is continuing record-breaking performances thanks to an easing of the automotive semiconductor shortage and an increase in the proportion of high-end vehicles such as Genesis models and SUVs.
Given the high proportion of overseas sales and exports, a high won/dollar rate also serves as a favorable factor. Hyundai Motor’s operating profit in the second quarter of this year stood at 2,979.8 trillion won, the highest ever since the introduction of a new accounting standard (IFRS) in 2010. A similar trend is expected in the second half of the year. Securities firms expect Hyundai Motor’s annual operating profit to exceed 10 trillion won for the first time since its foundation. Its sales are also expected to reach an all-time high of 137 trillion won.
On the other hand, parts suppliers are faced with growing difficulties. In the past, when car sales increased, parts makers also benefited from it. However, due to the semiconductor crisis, the absolute vehicle production volume plunged compared to the past. Rises in the interest and won/dollar exchange rates are also bad news to parts suppliers.
In the second quarter of this year, Hanon Systems’ operating profit stood at 60.1 billion won, down 40.2 percent from the same period of 2021. During the same period, Mando’s operating profit plummeted 40.4 percent to 45.7 billion won. Compared to these first-tier parts suppliers, second- and third tier suppliers suffered far more severe shocks.