Chinese automakers are putting pressure on South Korean auto parts suppliers to produce their products in China, threatening them with partnership severance.
According to industry sources, BAIC, which is running a joint venture with Hyundai Motor Co., recently told DAS to produce its DTP-03 seat rail in Wendeng, Weihai, where the South Korean car seat producer's manufacturing facilities are located. BAIC claimed that the local production will lead to logistics cost reduction and tariff reduction, adding that it will hold hands with another company if DAS refuses to comply.
DAS set up its plant in Wendeng 10 years ago. Before 2008, DAS used to produce its auto parts in South Korea, send them to its factory in China, and assemble them for supply to local automakers. It produces DTP-03 seat rail in its plants in Korea.
Many other auto parts suppliers are considering producing their products in China instead of South Korea. Beijing Hyundai Motor’s performance has significantly deteriorated since last year due to the Chinese government’s THAAD retaliation, and now BAIC is pressuring it to cut costs.
Experts point out that BAIC’s strong demand is not simply for cost reduction According to them, the demand is to weaken Hyundai’s supply chain by expanding its own auto parts supply network. BAIC made similar demands last year as well. Hyundai refused to comply, and then production had to be stopped for a while. DAS is already considering selling its shares in its Chinese subsidiary.