Overtaken by India
The Korea Automobile Manufacturers Association announced on September 25 that South Korea manufactured 2,551,937 cars during the first seven months of this year to rank sixth in the world behind China, the United States, Japan, Germany and India.
Until the end of June, South Korea produced 2,195,843 cars and India produced 2,186,655 cars. However, India increased its production volume by 388,656 in July, when South Korea increased its volume by 356,094, to outnumber South Korea for the first time in history.
South Korea is unlikely to be able to catch up with India as the domestic demand for automobiles in India is continuing to increase based on a stable growth of the Indian economy. Besides, Mexico is expected to overtake South Korea in the near future by making use of its geographical advantage as a bridge between North America and Latin America and the Mexican government’s incentives for companies manufacturing vehicles in its territory, which have raised its annual automobile production volume to up to 3.4 million units. Kia Motors recently opened a factory in Mexico with an annual production volume of 400,000 vehicles and Ford is planning to relocate its facilities for manufacturing small cars to Mexico.
Offshoring of the South Korean automobile industry is likely to accelerate due to frequent strikes and high labor costs. When it comes to the Hyundai Motor Group, its overseas production volume has already exceeded its domestic production volume. In addition, Kia Motors is currently working on manufacturing facilities in India. GM Korea and Renault Samsung Motors are increasing the volume of their cars produced in the United States and Europe and imported to South Korea.
Under the circumstances, the Hyundai Motor Company labor union is planning to go on an all-out strike on September 26 for the first time in 12 years. A six-hour strike is also scheduled for each of September 27 to 30.
The labor union went on 19 partial strikes during the course of this year’s wage negotiations. According to the top management of the company, the strikes have resulted in the non-production of 101,400 cars worth a total of 2.23 trillion won. The labor union in Renault Samsung Motors is predicted to go on strike, too. “High labor costs and militant labor unions have accelerated manufacturing facility relocation and this has led to a drop in South Korean auto parts manufacturers’ annual sales by more than five trillion won in 2015 alone,” said an industry source.