Concerns are rising over the future of the Korean automotive industry as it faces an urgent need to overhaul its high-cost and low-productivity structure to jack up sluggish global sales.
Samsung Securities said in its recent report that the Hyundai Motor Group’s domestic production volume is estimated to fall from 3.17 million vehicles in 2017 to 2.95 million in 2020 and then further down to 2.4 million in 2021 or later. According to industry insiders, this is likely to result in 100,000 to 160,000 lost jobs.
The brokerage added in its report that South Korean automakers already lost their inventory control functions due to hostile labor-management relations, frequent strikes and a continuous rise in wages. For these reasons, they are relocating their manufacturing facilities abroad at a rapid pace.
“Cost factors such as a rise in minimum wage and shorter working hours will raise the cost ratio of the Hyundai Motor Group to at least 33% in the near future and it is already too late to go back,” it went on to say.
The Hyundai Research Institute recently pointed out that 94,000 jobs are estimated to be lost after withdrawal of GM Korea, which produces 400,000 to 500,000 vehicles a year. On May 22, an anonymous source said based on the estimate that no less than 160,000 jobs could be lost in the South Korean automotive industry after 2021.
“The minimum wage is about to rise and working hours are about to be reduced, while the wage systems of automakers and auto parts suppliers will remain as they are,” said an executive at a local automaker, adding, “Then, the high-cost structure will be even more solidified with sales already sluggish and policy risks mounting, which means the local companies have no other option but to move abroad.”