Rows of cars lined up for export. (Image courtesy of Yonhap)
SEOUL, July 25 (Korea Bizwire) — South Korea’s automotive parts sector continues to grow in both scale and profitability, but remains behind global competitors in key performance metrics such as profitability and research investment, according to a new report from the Korea Automotive Technology Institute.
The report, released Thursday, analyzed 213 domestic parts manufacturers—including major Hyundai Motor Group affiliates—and found a 16% increase in total operating profit in 2023, reaching 4.51 trillion won. Combined sales edged up by just 0.18% to 124.7 trillion won, while the average operating profit margin improved to 3.62%, up from 3.13% a year earlier.
R&D investment also rose significantly, with total spending reaching 4.89 trillion won—a 13.5% increase—boosting the R&D-to-sales ratio to 3.92%, up from 3.46%.
Despite these gains, the report warned that Korean parts makers still fall short when compared to their global counterparts. For example, the average operating margin among 103 parts companies included in the EU’s top 2,000 firms stood at 7.5% in 2023—more than double the Korean average. Their R&D intensity was also higher at 4.7%.
The disparity is particularly stark when comparing investment levels. Hyundai Group’s five key parts affiliates collectively invested 2.44 trillion won in R&D last year, while Toyota’s seven affiliated parts suppliers have averaged around 1 trillion yen (approximately 9.5 trillion won) annually over the past three years in combined R&D and capital expenditure.
The report cited intensifying global pressures—from U.S. trade measures to increasing competition from Chinese firms—as reasons why the Korean parts industry needs stronger government support.
“Given the industry’s relative disadvantages, it is crucial to reinforce innovation capacity and support business transformation,” the report stated. “Support policies should be strategically targeted at companies with strong R&D track records and skilled talent to maximize impact.”
Kevin Lee (kevinlee@koreabizwire.com)
