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Korea Eximbank to Make Equity Investment in Domestic Car Parts Makers
Helping Extend Overseas Markets
Korea Eximbank to Make Equity Investment in Domestic Car Parts Makers
  • By Yoon Young-sil
  • December 18, 2018, 12:08
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The Export-Import Bank of Korea (Korea Eximbank) will make an equity investment in overseas subsidiaries of car parts producers.
The Export-Import Bank of Korea (Korea Eximbank) will make an equity investment in overseas subsidiaries of car parts producers.

The Export-Import Bank of Korea (Korea Eximbank) has decided to make an equity investment in overseas subsidiaries of car component producers which have difficulty with poor performance of domestic automakers, including Hyundai Motor Co.

According to investment banking (IB) industry sources on December 16, the Korea Eximbank confirmed an 8.5 billion won (US$7.52 million) equity investment plans for overseas subsidiaries under Dr Axion Co. and Howon Co. which are car part supplier of Hyundai Motor and Kia Motors Corp. It will invest 4 billion won (US$3.54 million) and 4.5 billion won (US$3.98 million) in Dr Axion and Howon, respectively.

Dr Axion, the supplier of Kia Motors, is recognized as having an excellent technology to such an extent that Hyundai Mobis Co. owns a 2.99 percent stake in the company. The investment will go to the Indian subsidiary of Dr Axion which produces and sells cylinder heads, a core part of car engines, in the nation.

The Korea Eximbank is making an equity investment to help Kia Motors, which has entered the Indian market last year, extend production equipment. However, the bigger reason is that Dr Axion has entered into partnership with an Indian firm. Dr Axion will supply its products to Mahindra and Mahindra Ltd. The Indian subsidiary of Dr Axion posted 55.6 billion won (US$49.15 million) in sales last year and showed a 50 percent growth as of the end of September this year.

Howon will receive the investment in its Turkish subsidiary which manufactures car bodies and frames. The company has recently won a supply deal with Ford Motor Co. in India. It will use the investment to increase the supply to Ford in order to diversify its market heavily dependent on Hyundai Motor. Howon is also seeking to develop its market and survive itself now, though it pushed into the Turkish market along with Hyundai Motor in 2007. The company had sales of 88.5 billion won (US$78.26 billion) in its Turkish subsidiary last year and continues to see growth this year as well.

The domestic auto part industry has difficulty in getting new loans or investments as some suppliers of Hyundai Motor are on the brink of bankruptcy. The Korea Eximbank is said to decide on the investment as both companies are overseas subsidiaries but not in China with great risks and are expanding new markets with their own technology.