The Chinese Embassy in Korea has proposed a meeting with the Korea Automobile Manufacturers Association (KAMA).
Industry insiders say that on the surface, the embassy proposed the meeting to promote cooperation between the two countries in the field of automobiles and parts, but a more practical intention is to support Chinese companies’ entry into the Korean market.
KAMA has accepted the proposal and decided to have a high-level discussion in Seoul in early July. Founded in 1988, KAMA has as its members Hyundai Motor, Kia Motors, GM Korea, Renault Samsung Motors, and SsangYong Motor.
Industry watchers speculate that the Chinese Embassy wants to hold the meeting in an effort to help Chinese carmakers and parts makers make a foray into Korea. Chinese automakers BYD and Songuo Motors set up booths at the Seoul Motor Show in April, and Chinese companies such as Future Mobility and Beijing Automobile are expediting their penetration into the Korean market.
When concluding the Korea-China Free Trade Agreement (FTA), Korea abolished tariffs on major car parts from China, judging that Chinese car parts lagged behind Korean products in terms of competitiveness. However, the competitiveness of parts made in China has improved significantly in recent years, and imports of Chinese auto parts have been on the uptick since the Korea-China FTA came into effect in 2015. Until May of this year, Korean auto parts exports to China shrank 23.4 percent, while imports from China swelled 12.4 percent.
Particularly, due to the U.S.-China trade dispute, sales of U.S. vehicles in China are plunging, prompting Chinese auto parts suppliers to look for new buyers. As auto parts imports from China increase in Korea, small and medium-sized Korean auto parts companies with low technological capabilities are under pressure.
Korean automakers can face U.S. tariffs on their cars when they increase the use of Chinese auto parts. The U.S. Department of Commerce slapped a high tariff on Korean oil pipeline products as they were made of hot-rolled steel from China. Earlier in February, the U.S. Department of Commerce submitted a report to the White House that imports of automotive parts from certain countries threaten national security. U.S. President Donald Trump put off his decision to impose tariffs on automobiles and auto parts for six months.