Korea's Auto Industry - Today and Tomorrow - Invest Korea

Table of Contents 

Korea’s Auto Industry-Today and Tomorrow 

Offering Investors a Future-Oriented Optimal Investment 

Environment 

02 Korea’s Auto Industry - Today 

04 Korea’s Auto Industry - Tomorrow 

07 Korean Auto Manufacturers 

13 Korean Auto Parts Industry & Manufacturers 

17 Auto Parts Manufacturers by core component 

23 Multinational Auto Parts Manufacturers in Korea 

27 Background to Investment by Multinational Auto Parts 

Manufacturers in Korea 

31 Operation of Auto Part Business in Korea 

34 The Features of Major Industrial Complexes and 

Detailed Infrastructures 

41 Korea’s Economic Trends, Labor and Labor Unions

Korea’s Auto Industry - Today and Tomorrow 

Offering Investors a Future-Oriented Optimal Investment Environment 

1. Korea’s Auto Industry - Today 

The year 2005 marks the 50 th year since Korea first began manufacturing automobiles. From 

the time when Korea started with a simple KD assembly process in the 1960s it has grown to 

be the only nation, among those that started developing an auto industry after World War II, 

which is capable of manufacturing cars with its independently-developed technologies, thereby 

becoming the world’s sixth-largest automaker today. 

Korea’s auto industry in global perspective. As of the end of 2004, the number of cars 

manufactured in Korea reached 3.47 million, of which exports amounted to 2.38 million units, 

making Korea the world’s 6 th -largest manufacturer (5.4%), after the United States, Japan, 

Germany, China and France. In terms of domestic consumption it ranked 10 th in the world by 

consuming 1.1 million units in 2004 

Big 10 Automotive manufacturing nation in 2004 

No Nation 

2003 

Portion 

2004 

Portion 

% 

(‘04/’03) 

1 USA 12,087 19.7 11,956 18.5 

-1.1 

2 Japan 10,286 16.8 10,512 16.3 

2.2 

3 Germany 5,507 

9.0 5,565 

8.6 

1.1 

4 China 4,444 

7.2 5,071 

7.8 

14.1 

5 France 3,620 

5.9 3,700 

5.7 

2.2 

6 Korea 3,178 

5.2 3,469 

5.4 

9.2 

7 Spain 3,030 

4.9 3,011 

4.7 

-0.6 

8 Canada 2,553 

4.2 2,711 

4.2 

6.2 

9 Brazil 1,827 

3.0 2,206 

3.4 

20.7 

10 UK 

1,846 

3.0 

1,856 

2.9 

0.5 

Worldwide 

61,319 100 64,616 100 

5.4 

Source: Korea Automobile Manufacturers Association (KAMA) 

(1,000units, %) 

When it comes to manufacturing scale, Korea-situated in the hub of Northeast Asia with China 

and Japan-has been playing a leading role, together with emerging China, in the region. The 

combined manufacturing capacity of these three countries ranked world’s first in terms of 

manufacturing output and third in terms of the scale of domestic consumption in the world, 

when compared by regional unit. 

02 I 0 3 Korea’s Auto Industry - Today and Tomorrow

No 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

Auto manufacturing and sales performance of Asia’s “Big 3” in 2004 

Country Manufacturing output 

(1,000 units) 

Northeast Asia (3 nations) 

Korea 

China 

Japan 

Korean Auto Industry in the world. The auto industry is regarded as a general and key industry, 

having significant ripple effects on other industries, thus stimulating the growth of related 

industries with brisk manufacturing on the back of fast-growing exports. Of Korea’s total trade 

surplus, amounting to US$30 billion, the auto industry including auto parts results in 2004 

accounted for 90%, or US$27.6 billion, paving the way for it to become the nation’s core 

industry. Exports of automobile increased 39.6% year-on-year to US$26.7 billion, which 

accounted for 12.8% of the nation’s total exports, setting a new record. 

Product 

Auto 

Assembled 

Parts 

Semiconductor 

Mobile phone 

Computer 

Ship 

Petroleum 

products 

Plastics 

Steel plate 

Video products 

15.545 

13.322 

2.223 

14.259 

9.854 

11.245 

9.909 

7.794 

4.524 

4.087 

3.519 

3.924 

150.439 

Big-10 Export products in 2004 

2001 2002 2003 2004 

% % % % 

1.3 

0.8 

4.7 

-45.2 

25.0 

-23.4 

17.7 

-13.9 

-10.3 

-15.6 

-4.1 

-15.6 

-12.7 

17.483 

14.779 

2.705 

16.631 

13.619 

12.941 

10.867 

6.382 

4.955 

4.024 

4.052 

3.644 

162.471 

19,052 

3,469 

5,017 

10,512 

12.5 

10.9 

21.7 

16.6 

38.2 

15.1 

9.7 

-18.1 

9.5 

-1.3 

15.2 

-7.1 

8.0 

23.346 

19.119 

4.227 

19.535 

18.697 

14.977 

11.334 

6.623 

6.260 

5.841 

5.618 

3.350 

193.817 

33.5 

29.4 

56.3 

17.5 

37.3 

15.7 

4.3 

3.8 

26.3 

45.1 

38.7 

-8.1 

19.3 

Domestic Demand 

(1,000 units) 

Western Europe 14,132 7,911 

North America 14,667 (USA 11,956) 18,875 (USA 17,301) 

Source: Ministry of Commerce, Industry and Energy(MOCIE) 

12,019 

1,095 

5,017 

5,853 

32.598 

26.668 

5.930 

26.450 

26.390 

17.180 

15.090 

9.802 

8.514 

8.498 

7.753 

3.162 

254.221 

(in US$ mil.,%) 

39.6 

39.5 

40.3 

35.4 

41.1 

14.7 

33.1 

48.0 

36.0 

45.5 

38.0 

-5.6 

31.2 

12.8 

10.5 

2.3 

10.4 

10.4 

6.8 

5.9 

3.9 

3.3 

3.3 

3.0 

1.2 

100.0



Automobiles have been Korea’s largest export product since 2001, followed by 

semiconductors, mobile phones (US$26.4 billion), computers (US$17.2 billion) and 

shipbuilding (US$15.1 billion). 

Along with automobiles posting a record high, auto parts also marked US$5.9 billion in 2004, 

up 40.4% from a year earlier, in tandem with the rising trend of Korea’s brisk car exports. 

Production 

(1,000 Units) 

Domestic 

(1,000 Units) 

Exports 

(1,000 units) 

Export 

(US$ mil) 

Current performance of Korea’s auto industry and outlook 

3,148 

1,622 

1,509 

2002 

% 

6.8 

11.8 

0.6 

14,780 10.9 

3,178 

1,318 

1,815 

Source: MOCIE, National Auto Association 

2003 

Despite sluggish domestic demand in 2004, Korea’s auto industry marked a record high in 

manufacturing thanks to booming exports. In 2005, domestic sales and exports are expected to 

rise slightly to exceed 3.6 million units, exceeding the record achieved in 2004. 

% 

1.0 

-18.7 

20.2 

16,561 17.7 

3,469 

1,095 

2,380 

2004 

% 

9.2 

-16.9 

31.1 

26,668 37.9 

2. Korea’s Auto Industry - Tomorrow 

(%) 

2005(Outlook) 

% 

3,600 

1,150 

2,450 

- - 

Korea’s auto industry aims at becoming an advanced auto manufacturer in the global market as 

a long-term vision. 

Korea plans to secure the 21 st century’s state-of-the-art technologies to develop next-generation 

automobiles that will serve as a growth engine for the future, thereby advancing to become the 

world’s fourth-largest automaker by 2012. And when it comes to the auto parts industry, Korea 

aims to upgrade the existing auto parts industry cluster into a high value-added cluster, 

transforming the traditional casting, molding and injection-type industry, dubbed the 3-D 

industry, into a sophisticated, advanced and environment-friendly industry. And in an effort to 

3.7 

5.1 

3.0 


comprehensively improve the Korean auto industry, it plans to develop the next-generation auto 

technologies and accelerate globalization in collaboration with academic, industrial circles and 

the government so as to further sharpen Korea’s international competitiveness to become the 

world fourth-largest auto manufacturer in 2012. 

When Korea emerges as a member of the elite club of advanced automakers in the global 

market, at least one local auto manufacturer will grow to become a member of the Big-5 global 

brands, and a member of the world’s top 100 auto parts manufacturers, which currently 

includes just a single local manufacturer, is expected to increase to up to 10. Moreover, the total 

number of automobiles manufactured will surpass the 4.3 million-level with a global market 

share reaching 10%, and the average export price per unit is forecast to jump to US$16,000 

from a current US$8,186 on the back of upgraded valuation. The domestic industry’s 

dependence on the auto industry is expected to increase up to 12.2% in 2008, from 10.7% in 

2001, to outpace the semiconductor industry. 

Manufacturing 

Exports 

Global market 

share 

Textile 

10.0 

10.2 

Contribution to the industry (2008) (%) 

5.6 

2.6 

Source: Korea Institute for Industrial Economics and Trade (KIET) 

Production (KRW trillion) 

Value added 

Exports (US$100 mil) 

Global market share(%) 

Employment 

Overseas production 

Note: based on assembled cars 

Steel Semiconductor Auto 

11.2 

17.5 

12.2 

6.6 

4.4 6.0 18.5 6.6 

Vision of Korean auto industry 

2002 2007 2012 

62 76 87 

29 39 55 

194 224 410 

5.5 8.1 9.8 

20 23 27 

20 100 205



Vision of Korean Auto-Industry 

Global Market Share 

Automobile Exports 

Automobile Outputs 

Auto parts Exports 

World's top 100th largest Auto part 

Manufacturer 

2003 2012 

5.4% (World’s No.6) 

US$ 18.9 billion 

3.18 million units 


1 Company 

(Mando) 

10.0 % (World’s No. 4) 


4.5 million units 

US$ 6 billion 

10 Companies 

Development of next-generation automobile and plan Korea aims at developing core 

component technology for next-generation cars, and in technical cooperation with large 

component manufacturers armed with independent parts development technologies, it has been 

pushing for building globalized bases in line with global sourcing trends. The trend of global 

auto industry technologies in 2010 is forecasted to be modularized toward high-safety and 

environment-friendly automobiles with telematics becoming increasingly popular, coupled with 

the components electrified up to 40% level. The market share of hybrid cars is expected to soar 

to around 10%, with a fuel battery-powered car to be commercialized by 2020. In line with 

such long-term trends, the local auto industry will internally focus on developing environmentfriendly 

diesel engine in the short-term, and considering that the hybrid is the intermediate 

stage ahead of a battery-powered car, it will concentrate the efforts on developing the hybrid 

car, combining fuel battery-powered technology with a small-sized environment-friendly diesel 

engine in the mid- to long-term. And as a long-term strategy, it will be drawing up a blueprint 

focusing on development and commercialization of fuel batteries. 

As part of these efforts, Korea has already launched a 10-year industry-academic joint project, 

dubbed the “Future Automobile Development Project”, from 2002 thru 2011, earmarking a 

budget totaling KRW1.25 trillion in an attempt to eventually develop an extremely-low 

pollution-generating (equivalent to 100km/21 level) intelligent car that will integrate the hybrid 

engine and fuel battery technology with high-efficiency energy, environment-friendly and stateof-the-art 

technologies. 


Sector 

Energy 

Environment 

Advanced technology 

Joint tasks 

Goals of the Future Car Development Project 

3. Korean Auto Manufacturers 

Final target technologies 

Technology securing CO2 exhaust 70g/km 

-High efficiency engine, Light-weight, Fuel battery 

Core technologies of extremely low pollution-generated 

mid & small-sized car (Euro-V requirements) 

- Catalyst, recycle, alternative fuel engine technologies 

ASV (Advanced Safety Vehicle) / Telematics-related 

system technology 

-Sophisticated electronics parts, Simulation design 

system technology 

Development of 100km/2l-level pilot car 

-Development of basic technology integrating the 

energy, environment and advanced system. 

Korean auto manufacturers, as of 2005, comprise Hyundai Motor Company, Kia Motors Corp, 

GM Daewoo Auto & Technology, SsangYong Motor Company and Renault Samsung Motors. 

Hyundai Kia Motors 

The nation’s largest auto manufacturer, with employees numbering 80,000 and total assets 

valued at KRW21 trillion, has grown to become a world-renowned automaker. 

Its domestic production reached more than 3 million annually, and its long-term strategy is to 

establish facilities abroad with manufacturing capacity in excess of 2 million units. 

Manufacturing facility of Hyundai-Kia Motors 

Hyundai s Ulsan factory is the world’s largest single auto-making factory, with five 

independent production lines covering a 5 million m area, manufacturing 1.6 million cars 

annually. It is the nation’s largest car production base, representing the Korean auto industry. 

Hyundai s Asan factory This state-of-the-art factory focuses on strategic export market cars 

built in an area covering 1,815,000m , with a total floor area of 660,000m pyeong to



accommodate the press, body, painting, assembly, engine lines and material production 

facilities, which are capable of manufacturing 300,000 units annually. It is a completely 

independent facility designed to manufacture only passenger cars. 

Hyundai s Jeonju factory is one of the world’s largest commercial vehicle manufacturing 

facilities built on a 990,000m site, with a floor area of 330,000m , and it is capable of 

producing 100,000 units annually. 

Kia Motors Corp operates its factories in Hwasung, Sohari in Gyeonggi Province and 

GwangJu in JeonNam Province of which annual production capacities reach 600,000, 350,000 

and 200,000 units, respectively 

NamYang 

Tech. C/T 

Hyundai-Kia Manufacturing Facilities 

Hwasung 

0.6 million 

Asan 

0.3 million 

Jeonju 

Tech. C/T 

Sohari 

0.35 million 

Jeonju 

0.1 million 

Gwanju 

0.2 million 

Mabuk Tech. C/T 

Hyundai Motor’s Tech. C/T 

Hyundai Motor 

Kia Motor 

World’s Largest Single Car 

Manufacturing Complex 

Ulsan 1.6 million 

5,600 cars/day 


GM Daewoo Auto & Technology Company, in which the world’s largest automaker, General 

Motors has invested, has been operating assembly lines in Bupyeong, Incheon, Gunsan and 

Changwon, capable of manufacturing more than 1 million cars annually. GM, besides its 

ongoing Powertrain (Engine & Transmission) project, and the investment in a testing track in 

Incheon and diesel engine factory in Gunsan, will continuously increase its investment to 

become a global auto development base, not to mention playing a leading role in Asia. 

GM Daewoo s production lines 

GM Daewoo s Bupyeong factory, covering an area of 990,000m to accommodate the engine 

factory and R&D center, is capable of manufacturing 500,000 passenger cars annually. 

GM Daewoo s Gunsan factory, built on a 1,221,000m site commenced operations in 1997, 

is equipped with a test-run track and shipping yard and is designed to produce 300,000 cars 

annually. 

GM Daewoo s Changwon factory, built on a 660,000m site commenced operations in 1991, 

and was designed to produce a combined total 240,000 units of compact cars and micro 

compact cars for the first time in Korea. 

SsangYong Motor Company specializing in SUV and RV vehicles, has production lines in 

Pyeongtaek and engine factory in Changwon. 

SsangYong s Pyeongtaek plant, built on a 1000,000m site and equipped with an R&D 

center and production lines, is capable of producing 250,000 cars annually. Among the parts 

manufactured in the Changwon factory are diverse engines including common rail Di engines, 

diesel turbo intercooler engines and gasoline engines, and core driving gears for 4-wheel-drive 

cars such as trans axle and rear axle. 

Renault Samsung Motors, founded in Sept. 2000 and built on a 1,650,000m site, has a stateof-the-art 

production facility capable of manufacturing 240,000 units annually. The production 

lines were designed mostly for manufacturing passenger cars, but with a blueprint to 

manufacture new models such as SUVs, it is considering building a next-generation gasoline 

engine factory, investing KRW600 billion over three years till 2007. 

Hyundai-Kia Group is the nation’s largest and worldwide car manufacturer with a rosy future 

blueprint to become one of the world’s leading car manufacturers. With a stable share of the 

domestic market, it has an ambitious plan to gradually expand its sales to the global market. 

Hyundai’s long-term strategy aims at becoming a global top-5, making inroads into China,


European nations and North America. It aims to sustain its current 60% domestic market share, 

while maintaining a strong portfolio and healthy financial standing. 

According to AUTOFACTS, Hyundai-Kia’s output ranked 9 th worldwide in 2003 and it is 

expected to reach 3 million cars in the domestic market and 2 million in overseas markets, 

making a combined total of 5 million, to become eligible to be rated as a Global Big-5. 

Hyundai 

Kia 


KMS, SlovaKia, 0.30 mil 

Under 

construction 

HAOS, Turkey/0.06 mil. 

Hyundai-Kia’s overseas production capacity and expansion plans 

Nation Firm 2004 2006 2008 2010 

USA HMMA - 0.3 0.3 0.5 

India HMI 0.25 0.3 0.4 0.4 

Turkey HAOS 0.06 0.06 0.3 0.3 

China BHMC 0.15 0.3 0.6 0.6 

China DYKM 0.06 0.13 0.43 0.43 

Slovakia KMS - 0.3 0.3 0.3 

Total Capacity 

0.52 1.39 2.33 2.53 

Source: Various reports and data 

BHMC, China, 0.15 mil 

(0.3 mil/2005) (0.6 mil/2008) 

HMI, India/0.25mil 

Total 

0.5 mil. Cars/’04 

0.9 mil. Cars/’05 

2 mil. Cars/’10 

DYKM, China, 0.06 mil 

(0.13 mil/’06), (0.43 mil/’08) 

HMMA, US/ 0.30 mil 

(in mil./yr.) 

10 I 11 Korea’s Auto Industry - Today and Tomorrow



Nation Company name 

(Partners) 

GM Daewoo Auto & Technology Company (As of March 2004) 

Production 

capacity 

Production start 

date 

Note 

Poland DW FSO 4,315 96.4 N/A 

Rumania RODAE 21,746 N/A N/A 

Uzbekistan N/A 46,474 N/A N/A 

China N/A 46,932 94.8 N/A 

India DMIL 5,880 95.7 N/A 

Taiwan N/A 5,547 N/A N/A 

Thailand N/A 8,554 N/A N/A 

Vietnam Vietnam DW 

Motor 

4,392 N/A 

N/A 

Egypt DW Motor Egypt 3,890 98.7 N/A 

Columbia N/A 72 N/A N/A 

Nation Company name 

(Partners) 

Vietnam Melcong CO. 

Mercedes-Benz 

Vietnam Ltd. 

SsangYong Motor Company (As of March 2004) 

Production 

capacity 

456 

2,844 

Production start 

date 

97.1 

96.9 

TAA 

TAA 

China N/A 3,492 N/A N/A 

Iran N/A 720 N/A N/A 

Source: 1.Source: KAICA 

2.TAA: Technical Assistance Agreement 

3.Production capacity of GM Daewoo and SsangYong were based on 2003 

performance 

Note 


4. Korean Auto Parts Industry & Manufacturers 

Korea s Rapidly-Growing Auto Parts Industry, though it suffered a downturn in the wake 

of the 1997 foreign currency crisis, has sustained an annual growth of 10% on average, and is 

forecast to continue annual growth of 9.6% till 2015. 

Engine 

parts 

Chassis 

parts 

Growth outlook for Korea’s auto parts industry (in KRW100 mil, %) 

2002 2003 2005 2010 2015 2005~ 

2010 

Average annual growth 

2010~ 

2015 

2003~ 

2015 

3,285 4,061 5,442 7,564 10,970 6.8 7.7 8.6 

4,975 6,310 7,880 10,240 13,425 5.4 5.6 6.5 

Others 16,738 21,119 26,990 35,891 51,111 5.9 7.3 7.6 

Total 24,998 31,490 40,312 53,695 75,506 5.9 7.1 9.6 

Source: KIET, S.TRADE report (Dec 2004) 

Sales trends of Korea’s auto parts industry (in KRW100 mil, %) 

Sales 

OEM A/S Export Total 

Growth rate 

1990 50,234 4,020 3,546 57,800 - 

1995 118,425 8,290 6,979 133,694 18.3 

2000 199,214 12,949 16,860 229,023 11.4 

2001 205,331 13,346 20,349 239,026 4.4 

2002 237,622 15,445 20,890 273,957 14.6 

2003 260,602 18,242 41,544 320,388 16.9 

Source: KAICA, Auto Industry Book 2004



Some of the features of Korea s auto parts industry 

First, its small and medium-centered industrial structure. The parts manufacturers 

directly dealing with auto manufacturers totaled 878, with 154,000 employees (as of 2003). 

Among them, the manufacturers categorized into large-sized companies (capital of KRW8 

billion or more with 300 or more employees) accounted for 7.9% or 69 manufacturers. But the 

number of companies with more than 1,001 employees totaled around 30. 

Large companies Small & medium Total 

Number of firms 69 (7.9%) 809 (92.1%) 878 

Total output of parts manufacturers directly dealing with auto manufacturers in 2003 amounted 

to KRW26.602 trillion. Average output per manufacturer was KRW29.68 billion. When 

detailing it by scale of manufacturer, the small company-group accounted for 1.9% (KRW1.8 

billion in an average value), medium companies 48.2% (KRW23.5 billion) and large ones 

49.9% (KRW188.5 billion), which clearly indicated large gaps among the companies. 

Second, heavy dependence on the parent company. Whereas Toyota, capable of 

manufacturing 7 million cars a year, had only 200 parts suppliers in 2003, Hyundai which sold 

1.67 million cars, had as many as 355, which means Hyundai whose output reached a mere 

one-fourth of Toyota, rather had far more suppliers. Of parts manufacturers, those supplying the 

parts to a single manufacturer accounted for 51%, heavily depending on the parent company. 

However, as price and quality-centered procurement practices have been taking root, the 

hierarchical trend is losing its power. 

Number of multi-transaction companies 

(Based on Hyundai, Kia, GM Daewoo, SsangYong, R-Samsung, Daewoo Bus) 

Number of parent companies to deal with 

1 2 3 4 5 6 

Total 

No of 

suppliers 

450 217 94 61 34 22 878 

% 51.3 24.7 10.7 6.9 3.9 2.5 100 


Third, relatively low commitment to exports. Whereas exports of electronic parts account 

for 70%, auto parts comprised a mere 18.2%, heavily depending on domestic consumption, 

compared with Japan’s 47.9% and the United States’ 205.3%. Such a trend resulted from a lack 

of suppliers with a large-scale global system, unlike the cases in the United States or Japan. 

Current status of Korean auto parts manufacturers Auto parts manufacturers with more 

than five employees totaled 3,328 as of the end of 2002. The breakdown is 532 for engine parts, 

526 for chassis parts and 2,270 for other parts. 

Auto parts manufacturers by type of product (2002) 

Parts No of 

manufacturers 

(in KRW billion) 

Employee Output Value added 

Engine 532 19,463 3,235 1,330 

Chassis 526 23,861 4,975 1,901 

Others 2,270 23,861 16,738 5,921 

Total 3,328 86,174 24,948 9,152 

Korean auto parts industry s subcontract structure Viewing the outsourcing rate, a major 

index indicating the auto parts industry’s subcontracting structure, auto manufacturers 

independently produced 37% of major components and parts needed, while the remaining 63% 

were acquired through the outsourcing. 

In contrast, parts and material suppliers produced 51% of the orders they received from auto 

manufacturers, while the remaining 49% were re-ordered by the subcontractors. Reasons for 

outsourcing to the subcontractors included the lower costs, first of all, and secondly the fact that 

the volume is too small for in-house production, so outsourcing is considered to be more costefficient.



In-house production versus outsourcing 

Assembly/Process firm Part/Material suppliers 

In-house production 37% 51% 

Outsourcing 63% 49% 

Source: KIET, Subcontract status in Korean industry 2004 

Bidding system in Auto Industry. For traditional technologies or products, both the 

assembly/process and parts/material industries adopted price competitive bidding, which was 

offered based on auto manufacturers’ designs. 

Bidding method 

Based on auto manufacturers’ designs 

Price competition-based bidding 


Technology development-based bidding 

Open price competition bid 

Others 

Bidding for existing product 


Assembly/Process Parts/Material 

44% 48% 

17% 16% 

17% 24% 

22% 16% 

For new technology or products, both the assembly/process and parts/material industries 

adopted price competitive bidding based on auto manufacturers’ designs. 

Bidding method 


Price competition-based bidding 


Technology development-based bidding 

Open price competition bidding 

Others 

Bidding for new technology products 


Assembly/Process Parts/Material 

50% 54% 

17% 17% 

11% 24% 

22% 5% 


Subcontractors by auto manufacturer The numbers of subcontractors of Hyundai and Kia 

were 355, and 395, respectively, which were the nation’s 2 nd and 1 st largest by number, 

followed by GM Daewoo, SsangYong and Renault Samsung. 

No of 

subcontractors 

Hyundai Kia GM Daewoo SsangYong RSM 

355 395 273 243 125 

Employees 

Average 

161,415 166,774 109,905 104,231 100,914 

employee per 

subcontractor 

454.7 422.2 402.6 428.9 807.3 

Source: Auto Book, KAICA 2004 

5. Auto Parts Manufacturers by core component 

Auto parts can be categorized by various ways such as role and function, type of raw material, 

processing method and the sequence in assembly line. Among them, categorization based on its 

function is most commonly used. The structure of an automobile comprises the body and 

chassis. The body serves as the framework for the automobile, providing the space for 

passengers and cargo, as well as to protect the parts, including the engine. The chassis is the 

remainder, which is classified by its function into the power-generation part, the powertransmission 

part, the steering device, braking system, suspension system and electrical system. 

The charts below represent the major local suppliers of auto parts and components. 

Engine Body 

Major local suppliers of auto parts and components 

Power Generation Parts 

Classification Name of parts 

Piston, Camshaft, Crankshaft, 

Connecting rods, Bellows 

Manufacturer (Customer) 

Auto manufacturers (Hyundai, 

Kia, GMDAT, SsangYong) 

Daechang Forging (Hyundai) 

Korea Flange (Hyundai) 

Yoosung Enterprise (Hyundai, 

Kia, GMDAT)


Cooling Unit 

Fuel supply parts 

Intake & Exhaustion parts 


Radiator, Cooling fan 

& motor 

Fuel pump, Water pump, 

Oil pump, Oil tank, Fuel 

tank, Oil filter 

Air filter, Muffler, Throttle 

body 

Power Transmission Parts 

Classification Parts name 

Transmission 

Axle 

Gear Parts 

T/M assembly, gear, shaft, 

T/M Oil pump 

C.V Joint, rear axle, 

universal joint 

Engine gear, T/M gear, 

Axle gear 

Halla Climate Control (Hyundai-Kia) 

Samsung Climate Control (Hyundai- 

Kia, GMDAT, SsangYong) 

Three Star (Hyundai-Kia, GMDAT, 

SsangYong) 

Modine (Hyundai-Kia) 

Korea Delphi (GMDAT) 

Daehan Calsonic (SsangYong) 

GMB Korea (Hyundau-Kia, GMDAT) 

Denso PoongSung Electronic 

(Hyundai-Kia) 

TI Automotive(Kia, GMDAT) 

Inergy Automotive (Hyundai) 

Sejong Industrial (Hyundai) 

Sejung (Hyundai-Kia) 

Daewoo Precision (GMDAT) 


Auto manufacturer (Hyundai, Kia) 

Hyundai Dymos (Hyundai-Kia, 

GMDAT, SsangYong) 

GM Powertrain (GMDAT) 

Hyundai Powertech (Hyundai-Kia) 

Wia (Hyundai-Kia) 





Tongil Heavy Industrial (SsangYong) 

Korea Flange (Hyundai) 



SsangYong) 

Daeil Industrial (Hyundai-Kia) 

Iljun Bearing (Hyundai, GMDAT) 


Shock-Absorber 

Front & Rear suspension 

Steering parts 

Suspension Parts 


Shock absorber 

Cross & side member, Coil 

spring, Suspension, 

stabilizer bar, Front & rear 

suspension module 

Steering gear & column, 

Steering Knuckle, Steering 

wheel 

Brake Parts 


Brake system 

Brake parts 

Brake corner module 

Disc, Drum & Hub, Lining 

& pad, proportional valve 


Mando (Hyundai-Kia, GMDAT, 

SsangYong) 

GM Powertrain (GM DAT) 

Kasco (Kia) 

Daewon (Hyundai-Kia, GMDAT, 

SsangYong) 

Yoonyoung (GMDAT) 

SL Corporation (Hyundai-Kia, 

GMDAT) 

Mando (Hyundai) 

Korea TRW (Hyunddai-Kia, GMDAT) 

SL Corporation (Hyundai-Kia, 

GMDAT) 


Hwashin (Hyundai) 


Hyundai Mobis (Hyundai-Kia) 

Mando (Hyundai, SsangYong) 


Kasco (Kia) 

Central (Hyundai-Kia, GMDAT) 

Sangshin Brake (Hyundai) 

Korea Beral (Hyundai-Kia, GMDAT) 

Mando (Hyundai, SsangYong) 

Korea Delphi (GMDAT)



Electric Parts 

Classification Parts name Manufacturer (Customer) 

Alternator Alternator 

Battery Battery 

Distributing wire Cable, connector 

Motor ABS, door lock, fan, 

heater, power window, 

wiper, seat, sunroof 

Switch Oil pressure, powerwindow, 

etc. 

Sensor Airbag, heat & 

temperature, 

crankshaft, wheel 

speed, air-flow 

Starter Starter motor 

Lamp Headlamp, Room-lamp, 

Side-lamp, fog-lamp 

Denso PoongSung Electric (Kia) 

Delco Remy (Hyundai, GMDAT) 

Korea Delphi (GMDAT, Renault Samsung) 

Valeo Electric System (Hyundai-Kia, GMDAT) 

Kasco (Kia) 

Delco (GMDAT) 

Atlas BX (Kia, GMDAT) 

Global battery (Hyundai, GMDAT, SsangYong) 

Sungwoo Automotive (Hyundai) 

Kyung Chang Industrial (Hyundai) 

Hangjin Industrial (Kia, GMDAT, SsangYong) 

Korea Electric Terminal (Hyundai-Kia, 

SsangYong) 

Denso PoongSung Electric (Hyundai-Kia, GMDAT) 

Dongyang Mechatronics (GMDAT, SsangYong) 

KAMCO (Hyundai) 


INZI Controls (Hyundai, Kia, GMDAT) 

Daesung Electric (Hyundai) 

Shinchang Electric (Hyundai, Kia, GMDAT) 

Il-Heung (Kia, GMDAT) 

Eaton Automotive Controls (Hyundai-Kia, 

GMDAT) 

INZI Controls (Kia, GMDAT) 

Unick (Hyundai, GMDAT) 

Siemens VDO Halla (Hyundai) 

KEFICO (Hyundai-Kia) 

Korea Robert Bosch (Kia) 

Denso PoongSung Electric (Kia) 

Delco Remy (Hyundai, GMDAT, SsangYong) 

Valeo (Hyunddai-Kia, GMDAT) 


SL Corporation (Hyundai-Kia, GMDAT, 

SsangYong) 

SL Lightech (Kia, GMDAT SsangYong) 

Il-Heung (Kia, GMDAT, SsangYong) 

Shin Woo Mechatronics (GMDAT) 


Classification Parts name Manufacturer 

Car Audio Navigation, car audio 

HVAC & Compressors 

HVAC products Condenser, Evaporator, 

Heater, A/C module 

Compressor Air-conditioning 

compressor 

Hyundai Autonet (Hyundai) 

Sepung Electronic (Hyundai-Kia, GMDAT, 

SsangYong) 

Valeo Electric (Hyundai) 


Air-bag Air-bag 

Mirror Rear, Outside view 

Other Parts 

Halla Climate Controls (Hyundai-Kia) 

Doowon Climate Control (Hyundai-Kia) 

Denso PoongSung Electric (Hyundai-Kia, 

GMDAT) 


Daehan Calsonic (SsangYong) 



Doowon Climate Control (Hyundai-Kia) 

Zexel Valeo (SsangYong) 


Delphi Sungwoo (Hyundai) 

Autoliv Mando (Hyundai) 

Hyundai Mobis (Hyundai) 

Kasco (Kia) 



Sambu (Kia) 

Schefenacker PoongJeong (Hyundai-Kia, 


Wooyoung Mirror (Hyundai-Kia, GMDAT)




Tire & Wheel Tire, AL wheel, wheel 

cover 

Rubber product Weather strip, rubber 

bushing, rubber hose 

Seat Seat, Seat belt 

Filter Oil filter, Fuel filter, 

Air filter 

Module Supplier 

Hankook Tire (All auto manufacturers) 

Kumho Tire (All auto manufacturers) 

Nexen Tire (All auto manufacturers) 

Yoonyoung (GMDAT, SsangYong, Renault 

Samsung) 

Pyung Hwa Industrial (Hyundai- 

Kia,GMDAT) 

Hwa Seung R&A (Hyundai-Kia, GMDAT) 

Kunhwa Trelleborg (Hyundai-Kia, GMDAT, 

SsangYong) 

Se-Myung Industrial (Hyundai, SsangYong) 

KORYO (GMDAT) 

Hanil E-Hwa (Hyundai) 

Hanil (Hyundai, SsangYong) 

Hyundai Motors Seat Division (Hyundai) 

Daewon Kang Up(GMDAT, SsangYong) 

Daewon Industrial (Kia) 

Dayou A-Tech (Hyundai-Kia) 

JCI Korea (Kia) 

Dae-Ki Automotive (Kia, GMDAT, SsangYong) 

Dongwoo Mann & Hummel (Hyundai, GMDAT) 

Samwon Industries (Hyundai-Kia, GMDAT, 

SsangYong) 

Mahle Donghyun Filter system (Hyundai) 

Classification Important parts name Manufacturer (Customer) 

Powertrain Module Engine, Transmission 

Cockpit Module 

Crash pad, Instrument 

panel, Audio, Dashboard, 

HVAC System 

Frontend Module Cooling module, 

Headlamp, bumper 

All auto manufacturers 


Duck-Yang Industrial (Hyundai) 



Chassis Module 

(Front & Rear) 

Suspension Module, Brake 

corner Module, 

Damper module 

Axle assembly 

Cooling Module CRFM(Condenser, Radiator, 

Fan & Shroud Module) 

Door Module Door panel, Door lock unit, 

Powerwindow unit, 

Speaker, Door trim 


Mando (Hyundai) 

Korea Flange (Hyundai-Kia) 

Donghee Industrial (Hyundai) 

Myung-Hwa Industrial (Hyundai-Kia) 

Daewoo Precision (GMDAT) 



Denso PoogSung Electric (Hyundai-Kia) 

Pyunghwa Precision (Hyundai-Kia) 

6. Multinational Auto Parts Manufacturers in Korea 

Foreign direct investment in Korea’s auto industry. The number of auto parts subcontractors 

directly supplying parts and components in Korea totaled 878 as of the end of 2003. Among 

them, large-sized companies numbered 69, while there were 809 small & medium companies. 

Of the total, the 148 foreign-invested firms accounted for 16.9%. The number of foreign 

advanced parts manufacturers investing in Korea outnumbered those in Japan, supplying about 

one-third of total demand by local auto manufacturers. Foreign investment has prompted the 

domestic auto parts industry to streamline the organization and sharpen their competitiveness as 

well. Direct investment by foreign auto manufacturers in the domestic industry as of the end of 

2003 totaled 227 cases, worth US$236.61 billion. Breaking it down by nation, Japan ranked 

first, followed by the United States, Germany, the Netherlands, the UK and France 

Foreign Direct Investment by nation (In 1,000 US$) 

Nation Case Amount Nation Case Amount 

Japan 104 440,322 Australia 3 7,539 

USA 54 758,830 Sweden 3 41,074 

Germany 27 473,655 Spain 2 5,002 

Netherlands 9 245,156 Singapore 2 17,068 

UK 7 54,773 Italy 2 1,688 

France 7 260,399 Canada 1 5,639 

Source: KAICA, Auto Industry Book 2004



The number of foreign auto manufacturers operating in Korea has been on the rise. According 

to KAICA, the number of foreign-invested auto parts manufacturers including tier 2 or 3 

reached 227 as of 2003 year-end, which accounted for 19.3% of the total in Korea. Foreigninvested 

firms recently supplied 35% of the total demand of Hyundai and Kia. Foreign 

investors’ market share in Korea is expected to rise in line with rapidly increasing investment. 

The auto industry’s facility investment in 2003 marked around US$2.5 billion, up 25% from a 

year ago. The production, particularly in exports, has been soaring. Foreign investment is thus 

forecast to increase further, beginning in 2005 when diesel engine passenger cars will be put on 

the market. 

Company 

Delphi 

Robert Bosch 

Denso 

Visteon 

Lear 

Magna 

Johnson Control 

Aisin Seiki 

Faurecia 

TRW 

Automotive 

Simense VDO 

Valeo 

ZF 

Dana 

Continental 

ThyssenKrupp 

Yazaki 

DuPont 

Calsonic Kansei 

Autolib 

Source: A&D monthly report, 01/2005 edition. 

Global Top-20 Operating in Korea 

Performance 

Two R&D centers and six joint ventures in Korea. 

Six enterprises with 1,330 employees 

Three factories, one joint venture and one sales & marketing office 

Halla CC, an affiliate of Visteon is nation’s third largest supplier. It has a 

number of joint-venture interior material manufacturers. 

Producing seat products at three factories owned by two companies. 

Has a number of factories. 

Has a factory producing auto interior products and parts 

Has a sales & marketing office. 

Took over exhaust system from Jangheung Precision. 

Specializing in manufacturing catalyst in collaboration with Daegi Ind. 

One joint venture, one technical tie-up partner and two production lines in 

operation 

Two joint ventures manufacturing auto electronic parts 

Three factories in operation 

Two factories in operation. 

Diverse facilities in operation. 

Representative office 

Auto-related tie-up under consideration 

One manufacturing facility in operation 

Three bases, including Dupont, a limited company, and Dupont Photomask, and DSI 

Four manufacturers including CESKOR that supplies exhaust system. 

A joint venture partner of Mando 


Investment by global top-100 auto parts manufacturers. Among the world’s 100 largest 

auto parts manufacturers, 34 firms have invested in Korea, which outnumber those investing in 

Japan. When including the top-100 of relevant industries such as tire manufacturers, the 

number of those who have invested or are considering investing will increase to 47. 

Ranking 

(‘03) 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

29 

30 

31 

32 

Investment by global top-100 auto parts manufacturers 

Name of foreign investors 

Delphi Corp. 

Robert Bosch GmbH 

Denso Corp. 

Visteon Corp. 

Lear Corp. 

Magna International Inc. 

Johnson Controls Inc. 

Aisin Seiki Co. Ltd 

Faurecia 

TRW Automotive Inc. 

Siemens VDO Automotive 

Valeo SA 

ZF Friedrichshafen AG 

Dana Corp 

Continental AG 

ThyssenKrupp Atomotive AG 

Yazaki Corp. 

Dupont 

CalsonicKansei Corp. 

Autoliv Inc. 

Michelin Group 

Koyo Seiko Co. Ltd 

Collins & Aikman Corp. 

ArvinMeritor Inc. 

GKN PLC UK 

American Axle & Manufacturing 

Holdings Inc. 

Takata Corp. 

Bridgestone/Firestone Inc. 

Freudenberg & Co. 

Benteler Automobiltechnik GmbH 

Goodyear Tire & Rubber Co. 

Hitachi Ltd. Automotive Products 

Sales 

(in US$ million) 

26,200 

23,200 

16,856 

16,513 

15,747 

15,345 

15,192 

13,534 

12,700 

11,300 

9,500 

8,879 

8,200 

7,918 

7,600 

7,300 

5,900 

5,510 

5,436 

5,301 

4,676 

4,062 

3,984 

3,915 

3,890 

3,683 

3,450 

3,420 

3,400 

3,400 

3,296 

3,284 

Investment 
















No investment 






No investment 

No investment 



No investment 


No investment 

No investment 

No investment 

No investment 

Investment

33 

34 

35 

36 

37 

38 

39 

40 

41 

42 

43 

44 

45 

46 

47 

48 

49 

50 

51 

52 

53 

54 

55 

56 

57 

58 

59 

60 

61 

62 

63 

64 

65 

66 

67 

68 

69 

70 

71 

72 

73 



Panasonic Automotive Systems Co. 

Toyota Gosei Co. Ltd. 

Mahle GmbH 

Motorola Inc. 

Federal-Mogul Corp. 

Magneti Marelli S.p.A 

Tenneco Automotive Inc. 

Tower Automotive Inc. 

Alcoa Center for Transportation 

Products 

NSK Ltd. 

BorgWaner Inc. 

Mitsubishi Electric Corp. 

Cummins Engine Corp. 

BASF AG 

Dura Automotive Systems Inc. 

Behr GmbH & Co.KG 

Hella KG Hueck & Co. 

Honeywell International 

Stanley Electric Co. Ltd. 

TI Automotive Ltd. 

Tokai Rika Co.Ltd. 

Brose Fahrzeugteile GmbH & Co. 

PPG Industries Inc. 

Compagine de Saint-Gobain 

Kolbenschmidt Pierburg AG 

Navistar International 

Hayes Lemmerz International Inc. 

Asahai Glass Co. Ltd. 

NTN Corp. 

Plastic Omnium Co. 

Cooper Tire & Rubber Co. 

Showa Corp. 

NHK Spring Co. Ltd 

Eaton Corp. 

New Venture Gear Inc. 

Alcoa Fujikura Ltd. 

Metaldyne Corp. 

Rieter Automotive Management AG 

Webasto AG 

Flex-N-Gate Corp. 

Timken Co. 

3,200 

3,162 

3,109 

2,949 

2,939 

2,886 

837 

2,816 

2,800 

2,791 

2,741 

2,735 

2,607 

2,400 

2,381 

2,353 

2,332 

2,300 

2,276 

2,189 

2,188 

2,122 

2,100 

2,089 

2,050 

1,956 

1,900. 

1,800 

1,790 

1,765 

1,700 

1,636 

1,616 

1,465 

1,448 

1,430 

1,412 

1,400 

1,367 

1,350 

1,396 

No investment 

No investment 




No investment 

No investment 


No investment 

No investment 





No Investment 



No Investment 





No investment 

No investment 

No investment 

No investment 

No investment 


No investment 

No investment 

No investment 

No investment 

No investment 


No investment 

No investment 


No investment 

No investment 

No investment 

No investment 


74 

75 

76 

77 

78 

79 

80 

81 

82 

83 

84 

85 

86 

87 

88 

89 

90 

91 

92 

93 

94 

95 

96 

97 

98 

99 

100 

Plikington PLC 

Hutchinson SA 

Wilhelm Karmann GmbH 

J.Eberspacher GmbH & Co. KG 

Mando Corp. 

Alcan Inc. 

Tomkins PLC 

Inergy Automoitv Systems 

Key Safety Systems Inc. 

Dow Automotive 

SKF Automotive Division 

Schefenacker International AG 

3M Automotive 

Meridian Automotive Systems 

Oxford Automotive Inc. 

Clarion Co. Ltd 

F-Tech Inc. 

Venture Industries 

Mitsui Kinzoku 

Grupo Antolin 

Auto Chassis International 

Edscha AG 

Alps Electric Co. Ltd. 

Pioneer Corp. 

Teksid Aluminum 

Nemak SA 

Superior Industries International Inc. 

1,340 

1,318 

1,300 

1,300 

1,300 

1,250 

1,229 

1,200 

1,200 

1,127 

1,120 

1,119 

1,030 

1,025 

1,007 

1,006 

1,001 

1,000 

1,000 

998 

960 

950 

910 

903 

894 

844 

840 

No investment 

No investment 

No investment 

No investment 


No investment 

No investment 


No investment 

No investment 

No investment 



No investment 

No investment 

No investment 

No investment 

No investment 

No investment 


No investment 

No investment 


No investment 

No investment 

No investment 

No investment 

7. Background to Investment by Multinational Auto 

Parts Manufacturers in Korea 

Reasons for investment by multinational auto parts manufacturers. In most cases, it was 

aimed at making inroads into the Korean market, and establishing a bridgehead to the Chinese 

or Japanese markets, and securing low-cost labor. Foreign investors’ strategy for marketing was 

thus focused on localization. Those securing a market share of more than 31% accounted for 

31% of the firms surveyed.



When it comes to General Motors, the largest foreign investor operating in Korea, the priorities 

they considered before determining their investment were, first, the scale of the market (one of 

Asia’s three largest markets and one of the world’s four fastest-growing markets); and secondly, 

Korea’s excellent technologies; and thirdly, Koreans’ productivity. Other reasons include 

Korea’s strategic geographical location and globalization. GM appeared to have made a 

decision on investment in Korea based on its market-oriented strategy, taking into account the 

benefits offered by Korea such as high technologies and productivity, domestic consumption 

and a huge potential neighboring market. 

In view of the aforementioned reasons for advancing into Korean market by foreign auto 

manufacturers, decisive factors appear to be advancing into the Korean market as well as the 

Chinese and Japanese markets, and low-labor costs, availability of highly-skilled workforce, 

and the incentives for specialized technologies, government support, raw material supply and 

exemption from import restriction regulations. 

10 

5 

0 

Securing 

raw material 

Using technical 

manpower 

Specialization 

of Technology 

Low labor cost Penetration into 

market 

Advance into 

Chinese/Japan 

market) 

Avoidance of 

import restriction 

Government 

support 

Foreign-invested businesses marketing trends. Eighty percent of locally manufactured 

products were sold in the domestic market, and very few of them were shipped to their home 

countries. Thus their investments were mainly aimed at the Korean market (71.2%) 

80 

60 

40 

20 

0 

2.7 

71.2 

5.6 

3.7 

3.7 

13.6 

4.1 

5.1 

4.4 

15.6 

5.6 7.9 

5.6 

Korean market Asian market Domestic market Other market 

2.5 

3.1 

3.3 

Others 


Benefits compared with investment in China, Japan and other countries in the Asian 

region. The global auto market is tending to move to Northeast Asia after Europe and the 

USA, and the attraction of the auto parts market environment in Korea has been increasingly 

improved for potential investors. 

More importantly, in the ever-improving Korean auto parts market environment, the 

hierarchical transaction practice of auto manufacturers in Korea has been gradually eased and 

rationalized to establish fair transaction relationships. Furthermore, the big manufacturers’ sales 

have continued their upward trend, thus sustaining the stable growth of the auto parts industry, 

while sales of foreign manufacturers operating or planning to operate in Korea have been on 

the rise. Since Korea is situated in the hub of Northeast Asia, which has the greatest growth 

potential in the world, it provides better benefits for making inroads into the Chinese market or 

the Southeast region. Besides, it effectively provides qualified engineering manpower, and a 

good environment for developing electronic devices within a short time, compared with most 

other countries, thanks to the availability of Korea’s highly advanced IT technology. 

Comparing Korea s auto parts investment environment with China, the advantages and 

disadvantages can be described as follows: 

Advantages: Infrastructure for parts and materials, manufacturing and quality control, export 

marketing capability, IT and related industries, competitiveness in technologies and quality. 

Highly-qualified workforce 

High productivity and quick adaptability to changes 

Abundant demand for components and material 

Perfect test-bed for new products and services for other Asian markets 

Well-developed infrastructure 

World-class ICT infrastructure 

Better protection of intellectual property 

Disadvantages: Relatively high labor cost-structure 

Relatively smaller domestic market 

Relatively confrontational labor-management relations 

Forecasted competitiveness in auto parts vis-a-vis Japan. Korea’s auto parts-related



technologies, which have been steadily improved, are expected to reach a similar level with 

Japan, except for specific parts, by the year 2005. However a significant gap still exists in the 

area of core technologies necessary for developing future intelligent cars. 

Brakes 

ABS 

Axle 

Steering Products 

Transmission 

High- 

Technology 

for future 

Vehicles 

Products 

Telematics 

Hybrid 

Fuel batteries 

Intelligent 

Electrical devices 

42V 

Low pollution 

engine 

Steer by Wire 

Parts design Production 

lines 

Source: KDB, 2003 (one Japanese yen = 100 won) 

Production 

technology 

Quality 

competitiveness 

95 100 100 100 98 

95 100 100 100 98 

95 100 100 100 98 

90 100 100 95 96 

85 90 90 85 87 

85 95 95 95 92 

50 32 32 - 38 

37 36 35 - 36 

25 90 90 60 66 

65 45 70 60 60 

85 85 95 85 87 

50 10 50 - 36 

Korea, an optimal destination for investment in auto parts. In line with Northeast Asia 

emerging as the hub of the world auto industry, the geographical benefits of this region are 

increasingly being highlighted. Japan, as a global economic power, has secured world-class 

auto manufacturing technology on the back of the world’s second-largest auto market, while 

China continues to shatter records for growth rate of both production and demand. With its 

explosive potential in demand, China has surfaced as the contest stage of the global auto market 

and industry. Korea has grown to become the world’s sixth-largest automaker within a short 31 I 

time thanks to significant growth of its export-driven industry, and it is still growing. Asia’s 

Big-3 has become the center of the world’s auto industry with their benefits and greatest market 30 

Overall 

Korea’s Auto Industry - Today and Tomorrow

potential. Of the three, Japan is relatively vulnerable because of high manufacturing costs. In 

contrast, China has yet to secure the sophisticated technologies and infrastructure, despite its 

rapid growth and high potential, to become an eligible investment destination. Korea, with its 

well-developed infrastructure necessary for auto manufacture and high quality level, has been 

equipped with high technical competitiveness and reasonable manufacturing costs, and has 

geographical benefits that could serve as a bridgehead to the Chinese market to become the 

optimal destination among the three countries, which global investors have been seeking. 

8. Operation of Auto Part Business in Korea 

Working system and operation. The working system of major auto parts manufacturers and 

foreign manufacturers operating in Korea adopt two-shift work schedules, daytime and 

nighttime, which is regarded as a typical work system. In case of office workers, working hours 

are 08:00-19:00, a single-shift system, but a few manufacturers adopt a three-shift system, 

although this is unusual in Korea. No significant differences were observed between domestic 

and foreign manufacturers. The time between the shifts is generally accepted as overtime work. 

Average annual working days. There is an average of 250 working days a year, with factory 

operation ratio of 80% or more on average during Q4 in 2004. 

Daytime 

Overtime 

Nighttime 

Overtime 

Others 

Actual Examples of Working Hours in Auto Parts Manufacturers 

Local firm Local firm Foreign-invested firm Foreign-invested firm 

“M” 

“S” 

“D” 

“V” 

08:30~17:30 08:00~17:00 08:00~17:00 08:00~17:50 

17:30~19:30 17:00~21:00 17:00~21:00 18:00~21:00 

21:00~06:00 21:00~06:00 23:00~08:00 21:00~06:00 

06:00~08:00 06:00~08:00 21:00~23:00 06:00~08:00 

Office workers: single shift, 40 hrs/week, with overtime work



Recruitment (office workers and R&D positions) 

A typical hiring method adopted by local manufacturers includes ordinary and extraordinary 

recruitment. An annual ordinary recruitment is the typical practice adopted by large-size 

manufacturers with 1,000 or more employees. Since the 1997 foreign currency crisis, which 

triggered a large-scale restructuring, recruitment began changing to an as-needed basis, instead 

of the traditional annual event-like practice. 

Recruitment on the Internet. Some major auto parts manufacturers began recruiting their 

manpower by advertising the recruitment on the Internet such as Pop-Up, so as to receive the 

applications, from time to time. 

Recruitment through industry-academic cooperation. Some of the major manufacturers 

offer scholarships to college or graduate school students they previously selected to 

secure eligible manpower in advance. 

Open recruitment via the mass media The most typical practice adopted by the companies 

when they need to hire a large number of employees is advertising in daily newspapers, 

technical journals or college newspapers. 

Recruitment using Search Firms (Head-Hunters). The use of recruitment firms when 

hiring workforce specializing in a specific area, or experts in core sectors, or executives, is 

becoming increasingly popular. 

Recruiting factory workers 

Recruiting through schools (vocational or technical, or ordinary high school) The most 

commonly applicable recruiting practice adopted by the businesses, which receive the 

recommendation on eligible students from the vocational or technical high schools at 

company’s request. 

Recruiting through vocational centers. The companies at times provide some trainees who 

have completed a certain training course at vocation centers with a minimal training program 

required for jobsite service, before hiring. 

Recruiting through personal recommendation. When requiring unskilled workers, 

recommendations are received from existing employees, which is expected to shorten the 

recruiting process, as well as relatively quick adaptation to the assignment. 


Labor costs. The wage level of the auto parts industry is relatively lower than that of assembly 

manufacturers, but the wages of parts manufacturers belonging to large-sized business or 

foreign-invested manufacturers are on a very similar level to those of auto manufacturers. 

However, the small & medium-sized manufacturers still offer relatively low wages. The wages 

of Korean auto parts manufacturers are determined by seniority or job description, rather than 

labor’s skill or performance commonly adopted by advanced countries. 

The table below describes the wage levels in general. This data represents average labor costs. 

(The differences may vary by manufacturer or job grade, not corresponding to the table below) 

Production 

workers 

Office Workers 

Research Workers 

Small/Mediumsized 

Company 

Large-sized 

Company 

(in US$, as of Nov 2004 

Average 

Starting Salary 13,020 21,700 17,500 

Within 5 yrs 16,100 24,500 20,500 

Within 10 yrs 19,170 27,400 23,500 

Over 10 yrs 20,685 29,700 25,200 


Within 5 yrs 16,100 28,500 22,500 

Within 10 yrs 19,170 34,200 27,000 

Over 10 yrs 20,685 40,000~68,500 35,000 


Within 5 yrs 22,280 28,500 22,500 

Within 10 yrs 25,450 34,200 27,000 

Over 10 yrs 28,640 4,000~68,500 35,000 

Source: Data from municipal government offices



9. The Features of Major Industrial Complexes and 

Detailed Infrastructures 

Major auto parts storage facilities in Korea 

Distributional features. Auto parts storage has a close relationship with the locations of the 

major car makers, and they appear to have been affected by the development of parts / 

material centers such as electrical, mechanical, electronic, plastic and steel components and 

products, and the domestic market and distribution networks.. 

Auto parts storage area Distributed in Gyeonggi Province (Southwest), South Chungcheong 

Province (North west), North Jeolla Province (Gunsan-Jeonju belt), South Gyeongsang 

Province (Mid & South), Busan, Daegu, Incheon, Gwangju and Ulsan.. 

Gyeonggi Province Distributed in Southwestern region including Ansan, Siheung, Whasung 

South Chungcheong Province Benefit of neighboring on Hyundai’s Asan and GM 

Daewoo’s Gunsan factories. 

North Jeolla Province Gunsan is located nearby GM Daewoo Factory, while Jeonju 

neighbors the Hyundai commercial vehicle vendors. 

South Gyeongsang Province Thanks to well-developed mechanical industry, GM Daewoo, 

Renault Samsung and Hyundai Motors’ vendors are concentrated on the region. 

Busan Concentrated in the industrial complex area around Yangan near the downstream of 

Nakdong River, and Geejang county, which connects with Ulsan, an automobile Mecca. 

Renault Samsung-related vendors are concentrated in the Shinho industrial complex. 

Daegu Mostly distributed in the Northwest in the vicinity of Sungseo industrial complex, 

which is accessible to Changwon and Woosan via Guma and Gyungbu Expressway. 

Incheon Many vendors of GM Daewoo, Kia and Hyundai are concentrated in the Incheon 

and Gyeonggi Province area, including Namdong and Bupyeong industrial complex. 

Gwangju Most of the Kia vendors are distributed in the Gwangsan-gu and Seo-gu area. 

Ulsan. The vendors of the nation’s largest car maker, Hyundai Motors, are concentrated 

mainly in Ulsan, which is strongly connected with nearby Geejang and Wiilju-gun. 


Incheon/Gyeonggi-do 

Bupyeong Gangwon-do 

Hwaseong 

Gwangmyeong 

Pyeongtaek 

A 

Chungcheongnam-do 

Gunsan 

Chungcheongbuk-do 

Gyeongsangbuk-do 

Jeollabuk-do 

Jeonju 

Gyeongsangnam-do 

Busan 

Gwangju 

Changwon 

Jeollanam-do 

Ulsan 

Hyundai 

GM Daewoo 

Kia 

Renault Samsung 

SSangYong 

Among the industrial complexes designed to be exclusive for the auto parts industry are foreign 

enterprise-only complexes and free trade zones, besides the normal industrial complex (state or 

regional). 

Foreign enterprise-only complexes were planned and designated in consideration of rising 

land prices that hindered foreign direct investment and factory-building investment 

(Greenfield-type), and foreign investors’ preference for lease over procurement to reduce the 

capital investment to provide the foreign enterprises with the land at a low cost. 

Government s support regarding foreign enterprise-only complexes includes; 

Rent. In the case of high technology businesses valued at US$1 million or more, the rent is 

totally exempted, and in the case of general manufacturing firms investing US$5 million or 

more, 75% of the rent is exempted.



Tax benefits. For income tax and corporate tax, 100% of the tax is exempted for 5 years and 

50% for another 3 years, when the tax belongs to national tax. When it comes to local tax 

(acquisition tax, registration tax, property tax and integrated land tax), a 100% exemption is 

granted for 5 years and 50% for another 3 years, after the date of acquisition, and a reduction 

for a maximum 15 years will be possible in accordance with the municipal government’s 

regulations. In the case of tariffs, special excise tax and value added tax, a 100% tax exemption 

is granted on capital goods for 3 years after the declaration of investment. 

Sale of land. Of the sites covering 4,615,000 m , as of Oct 2004, 63.9% or 2,950,000m , were 

sold. And in the case of leases, 59.8% or 2,476,000m of 4,141,000m was completed. 

Breaking it down by region, Chunan marked 100% completion in both sales and leases. 

Viewing the remainder, Pyungdong marked 58%, Jinsa 53.6%, Daebul 38%, Gumi 38.6% and 

Ohchang 29.2%. (differences in sales rates between the regions are estimated to have been 

caused by inconsistent designation of the sites and different adjustment dates) 

Location 

Eligibility 

Types of 

business 

eligible 

Land scale 

Chunan 

Chuan City 

Baeksok, Saengsung, 

Chaam-dong area 

Pyungdong Daebul 

100% foreign-invested firm 100% foreign-invested firm 100% foreign-invested firm 

Joint venture with Joint venture with foreign Joint venture with foreign 

foreign investment investment amounting to investment 

amounting to 30% or 

more 

10% or more 

3,306m ~4,959m 

(1,000Py~15,000Py) 

Gwangju City 

Jangrok-dong, 

Gwangsan-gu area 

1.High Tech Business by 1. High Tech Business by 

the FIPA 

the FIPA 

2.High Tech Business by 2. High Tech Business by 

MOCIE 

MOCIE 

3. New Tech Business with 3. Other general 

NT Mark 

manufacture 

6,612m or more 

(2,000Py or more) 

Nanjeon-ri, Nabulra, 

Samho-myun, Youngamgun, 

South Jeolla Province 

1.High Tech Business by 

the FIPA 

2.High Tech Business by 

MOCIE 

3. Other general 

manufacture 

6,612m ~16,529m 

(2,000Py~5,000Py) 

[As of Oct 2004] 


T 

O 

T 

A 

L 

S 

A 

L 

E 

L 

S 

Factory 

Sale 

Lease 

Sale 

(%) 

Lease 

(%) 

Price 

Chunan 

Payment Down payment 30% 

Interim 30% (within 3M) 

Balance 40% (within 6M) 

Rent 

Pyungdong Daebul 

Reduction High Tech with investment US$1 mil or more 

General manufacture with investment US$5 mil: 75% reduction 

Others 

714,000 m 1,234,000 m 1,614,000 m 

491,382.6 m 

(148,643 Py) 

22,749.9 m 

(6,882 Py) 

468,632.7 m 

(141,761 Py) 

957,977.9 m 

(289,788 Py) 

19,835.1 m 

(6,000 Py) 

938,142.8 m 

(283,788 Py) 

1,614,441.4 m 

(488,369Py) 

431,096.2 m 

(130,407 Py) 

1,183,345.2 m 

(357,962 Py) 

(Area: 1000m /firm) (Area: 1000m /firm) (Area: 1000m /firm) 

23/2(100%) 20/1(100%) 431/3(100%) 

469/39(100%) 733/48(78%) 648/17(55%) 

KRW150,500/m 

(KRW497,523/Py) 

KRW86,515/m 

(KRW286,000/Py) 

Down-payment 10% 

Balance: By 2-year installment 

(By 8-quarter installment) 

KRW69,400/m 

(KRW229,425/Py) 

By 5-year installment 

By 6-month installment 

KRW121/m /M(KRW400/Py/M KRW40/m /M(KRW132/Py/M) KRW27/m /M(KRW89/Py/M) 

National tax (corporate, income): High Tech & Industry support service 

-5-year exemption with 50% for another 2 years 

Local tax 

- Corporate, Registration, Property tax: 5-year exemption, 50% for another 3 years 

(Exemption may be extended up to 15 years according to municipal government’s 

regulations) 

- Integrated land: Five-year exemption, 50% for another 3 years.

T 

O 

T 

A 

L 

S 

A 

L 

E 

Location 

Types of 

business 

eligible 

Land scale 

L 

S 

Factory 

Sale 

Leas 

Sale(%) 

Lease(%) 

Others 



Gumi 

In #4 complex in Gumi Ohchang-myun, 

Chungwon-gun, 

Chungcheong Province 

(In Ohchang Ind Complex) 

Ohchang Jinsa 

Jinsa Industrial Complex 

In Sanam-myun, Sachun 

City, South Gyeongsang 

Province 

100% foreign-invested firm 

Joint venture with foreign investment amounting to 30% or more 

(Investment more than KRW50 million)) 

1. High Tech Business in accordance with Foreign Investment Promotion Act 

2. Advanced Business in accordance with Industry Development Act 

3. Other general manufacture 







559,000 m 496,000 m 496,000 m 

559,347m (169,202.5Py) - 

559,347m (169,202.5Py) 

495,870m (150,000Py) 

- 

495,870m (150,000Py) 

(Area: 1000m /firm) 

495,870m (150,000Py) 

- 

495,870m (150,000Py) 

216/6(38.6 %) 227/6(46%) 226/8(54%) 

Price 

(posted) 

KRWW109,000/m KRW57,000/m KRW103,000/m 

Payment 

- - - 

Rent KRW121/m /M(KRW400/Py/M) 4KRW0/m /M(KRW132/Py/M) KRW27/m /M(KRW89/Py/M) 

Reduct- High Tech with investment of US$1 mil or more 

ion General manufacturing with investment of US$5 mil: 75% reduction 

National tax (corporate, income): High Tech & Industry support service 

-Five-year exemption with 50% for another 2 years 

Local tax 

-Corporate, Registration, Property tax: 5-year exemption, 50% for another 3 years 

(Exemption may be extended up to 15 years according to municipal government’s 

regulations) 

-Integrated land : 5-year exemption, 50% for another 3 years. 


Free trade zone. Export-free zones were established in Masan (1971) and Iksan (1974) in an 

attempt to attract export-centered foreign direct investment, and they were officially renamed as 

free trade zones in accordance with revised laws designating the free trade zones anew in Jan 

2000. 

Support for free trade zones 

Rent. Rentals of around one-fifth level compared with other areas in Korea, with long-term 

contracts of more than 10 years, which may be further extended. 

Tax benefit. When moving to free trade zones, a five-year 100% tax exemption on corporate 

and income tax is granted, and 50% reduction for another 2 years is also granted. Local tax 

(acquisition, registration, property and integrated land tax) is 100% exempted for 5 years, with 

50% exemption for another 3 years, which can be extended up to 8-15 years maximum. A 

tariff, special excise tax and value-added tax on capital goods are also subject to exemption. 

Development 

Period 

Free Trade Zones (2003) 

1970-1971 1974-1993 2000-2003 2003-2007 

Designation 1970.1 1973.10 2000.10 2002.11 

Area (1000m ) 954 309 1,254 1,157 

Rent (W/m ) Factory: 124 

Standard: 415-965 

Factory land: 94 

Standard: 462-631 

Requirements: 

Free 

Other FI firms: W40 

Requirements: 

Free 

Other FI firms: TBD 

No. of firms 78 32 U/ development U/ development 

Foreign firms 47 6 U/ development U/ development 

Type of Business Electricity 

Electronics 

Masan Iksan Gunsan Daebul 

Textile Auto parts, 

Machinery 

Logistics, Trade, 

Manufacture 

Source: Administration office of free trade zone 

Conditions for free provision: Investment US$10 million for high tech 

Investment of US$1 million with at least 30% of foreign investment



Foreign investment zones. In the case of high tech manufacturing and industry support 

services 

with foreign investment amounting to US$30 million, it may be designated as a foreign 

investment zone, granting most of the benefits granted by Foreign Investment Promotion Act. 

Support for foreign investment zones 

Rent. The rental for state-owned property within foreign investment zones may be 100% 

exempted. 

Tax benefits When designated as foreign investment zones, income and corporate tax, if they 

are national tax, are exempted for 5 years, and 50% for another 2 years (when no income is 

generated for 5 years from the date of business, the period is counted after 5 years). Local tax, 

(acquisition, registration, property and integrated land tax) is 100% exempted for 5 years, with 

50% exemption for another 3 years, which can be extended up to 15 years maximum. 

Other benefits. Support includes development cost within a foreign investment zone, and 

infrastructure such as harbor, roads, water supply and electricity, and the foreign-invested 

company is not obliged to hire nationally meritorious persons as required by the government’s 

labor regulations; and they are exempted from payment of disruption costs during factory 

construction, as well as the medical, education and housing benefits. 

Region Area 

(1000 Py) 

Designation of Foreign Investment Zones 


(US$1 mil) 

Sachun 52 209 Korea GN Taiyo Yuden (Japan) 

Chunan 150 46 

Core Film (US) 

Yangsan 6 32 

J.S.T (Singapore) 

Yeochun 183 206 

Korea BASF (Germany) 

Yeongi 58 70 

Korea Auto Glass (Japan) 

Eumsung 45 240 Toshiba (Japan)/Dongbu Elect 

Pyeongtaek 31 158 Dongwoo STI, DW Fiber Film 

(Japan) 

Asan 112 923 

Total 637 1,884 

Investor 

S-LCD (Japan) 

8 regions 

Designated 

date 

99.10 

99.11 

00.03 

00.12 

00.12 

01.06 

03.12 

04.05 

- 


10. Korea’s Economic Trends, Labor and Labor 

Unions 

Korea’s current economic indices are indicated as follows: 

Economic growth: In 2004 economic growth is forecast to be 4.7%, up from 3.1% in 2003, 

and the goal in 2005 is set at the 5% level. 

US$ 

15,000 

10,000 

5,000 

11,176 

7,355 

-6.9 

Source: Bank of Korea (www.bok.or.kr) 

[Trends of GDP growth and GNI per capita] 

9,438 

9.5 8.5 

3.8 

10,841 10,162 

97 98 99 2000 2001 2002 2003 

Wage growth: According to KLI, nominal wage growth in 2004 was forecasted to be 7.5+/- 

0.5%, down from 9.2% in 2003. 

[Wage growth trends] 

GNP per capita GDP growth rate 

1000, person (Year-on-year, %, Index) 

150 

130 

110 

90 

70 

50 

100 

4.7 

5.6 

8.0 

5.6 

105.1 

5.1 

5.1 

1.0 

116.8 

10.162 

2000 2001 2002 2003 

11.2 

8.2 

11,493 

7.0 

127.6 

126,46 

Nominal wage index Nominal wage hike rate 

Real wage hike rate 

9.2 

5.5 

3.1 

12 

8 

4 

0 

-4 

-8 

12 

10 

8 

6 

4 

2 

0



Consumer price hikes: The 2005 price hike rate is forecasted to be 2% to 3%, down from 

4.9% and 4.1% in 2004 and 2003, respectively. 

12.0 

9.0 

6.0 

3.0 

0.0 

11.1 

7.5 

0.8 

2.4 

[Trends of year-on-year consumer prices] 

3.7 

2.3 

5.1 

4.1 

98 99 2000 2001 2002 2003 2004 2005.1 

Korea s current labor economy index 

Labor productivity. The labor productivity of the manufacturing industry in the fourth quarter 

of 2004 rose by 11.6%, while the annual average rate in 2003 marked 8.1%. 

2.7 

2.5 

4.1 

3.6 

Consumer price 

[Labor productivity improvement trends-Manufacturing sector] 

(Year-on-year) 

Living price 

1000, person (Year-on-year, %) 

120.0 

100.0 

80.0 

60.0 

91.6 

5.6 

100 

9.1 

110.2 

4.9 

3.6 

119.2 

99 2000 2001 2002 2003 

Source: Korea Productivity Center (www.kpe.or.kr) 

98.6 

11.7 8.1 

5.6 -1.4 

5.6 5.6 

4.7 

3.1 

Index Climb rate 

12 

10 

8 

6 

4 

2 

0 

14 

10 

6 

2 

-2 




Outlook for Korea’s major economic indices in 2005 Outlook for 2005 

Growth Private Construction Facility Current Exports Imports Consumer Unemploym 

As of (%) consumption investment investment income/exp (US$100mil (US$100mil price (%) ent 

(%) (%) (%) (US$100 mil) ,% ,%) 

(%, 1000) 

MOFE 04.12.30 5%level 3.2 2.3 3.2 200 - (7.5) - (13.7) Early 3% Mid 3% 

BOK 04.12.9 4.0 1.8 0.5 5.3 160 2,730(7.3) 2,450(9.1) 3.0 3.6 

IMF 05.2.13 4.0 1.7 - - - - (8.7) - (7.5) 3.2 3.6 

OECD 04.11.30 4.5 2.0 - - - - (13.3) - (12.8) 3.5 3.5 

Note: IMF’s unemployment rate forecast as of 09/24/2004 

*Forecast of GNI per capita in 2005: US$16,900 (BOK) 

Positive changes in labor-management relations in Korea 

Rational relations and cooperation among the labor-management-government have been 

taking root. Recently, labor’s understanding and attitude toward the labor movement has been 

changed in a positive way. Inside the labor circles, there has been increasing criticism against 

their union’s aggressive struggle, with a thought that their movement should be based on 

popular support. In line with this movement, the businesses, in an effort to remove the distrust 

and establish healthy relations based on mutual trust, declared their commitment to transparent 

and ethical business operations. Businesses involved include Shinsegye, Kookmin Bank, 

Samsung Insurance, POSCO, Samsung SDI, Dongbu Steel, Hankuk Electric Glass, Yuhan 

Kimberly, and LG Philips LCD etc.) 

A more rational labor-management negotiation process has been increasingly expanded. 

Early settlement of disputes based on dialogue and compromise has been taking root, against 

the background of negative public sentiment against the illegal strikes and the economic 

downturn. Thanks to such efforts, the loss of working days has been on the decline for three 

consecutive years (Loss of working days: 1,580 days in ‘02 1,299 in ‘03 1,199 in ‘04) 

Law-abiding practices are becoming more apparent. Illegal practices in the course of 

negotiation are disappearing rapidly, with fewer numbers of people arrested. The tense relations 

between the labor and management have been eased. 

(Number of people taken into custody : 221 in ‘01 200 in ‘02 165 in ‘03 71 in ‘04) 

Stabilized wages. Wages have been stabilized downward, with a narrowing gap between the 

jobs. The average wage raise, as a result of negotiation (based on gross), was 5.5% , down 

1.2% from a year ago, sustaining the downward trend. 

(Wage hike trends: 6.7% in ‘02 6.4% in ‘03 5.2% in ‘04)

Korea's Auto Industry - Today and Tomorrow - Invest Korea

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