SEOUL, Dec. 6 (Korea Bizwire) – Korean auto parts makers are growing more active overseas, backed by factors ranging from personnel costs to the possible global protectionism that may be triggered by U.S. president-elect Donald Trump in line with his election pledges.
Castec Korea, a manufacturer of automobile components that supplies parts to global automakers including Volkswagen, Audi, and Mercedes-Benz is among such companies. Castec recently announced that it would invest 30 billion won ($25.6 million) to build a plant in Vietnam that will enter operations in 2017.
“The factory in Vietnam is currently in its pilot production,” said its Castec President Yoon Sang-won to the Yonhap News Agency. “Full-scale production will begin next year.”
The Vietnamese venture comes after a 20-billion-won investment in the company’s Korean plant, and will serve as the second of its kind operating outside of Korea.
Among Castec’s biggest reasons for expanding overseas operations is personnel cost. According to Yoon, labor costs overseas are roughly 10 percent of those in South Korea.
“If we can’t solve the issue of personnel expenses, our overall cost of production will increase, making it difficult for us to find customers,” he added. “We have to focus on establishing production lines overseas in order to boost our price competitiveness.”
Hanjung NCS, a company manufacturing auto parts for EVs, is targeting the Chinese market, and has so far been successful in securing local strategic partners.
Although its previous focus was on the American market, the recent growth in popularity of environmentally friendly vehicles in China urged the company to reconsider its options.
“We have practically finalized our agreement with two medium-sized automakers in China, and will be supplying our (EV) sensors to the companies starting in March 2017,” said CEO Kim Hwan-sik. “Sensors are essential components of electric vehicles, and we have a strong position in the global market.”
Another such manufacturer is Hyolim Group, which plans to boost investment in the U.S.
Although it has several partners already working together in the country, it’s now considering building a local production facility in line with the election of Donald Trump, who is likely to introduce protectionist policies that would potentially impose higher tariffs on goods made in Korea.
“The U.S. currently accounts for about 30 percent of all our revenue, and we’re planning to bring that number up,” said CEO Han Mu-kyung. “We don’t expect tariffs to soar drastically, but we still need to prepare for the worst.”
Direct overseas investment by domestic firms has been on the rise recently across all industries. Direct investment refers to a long-term investment with the purpose of business exploits, such as establishing an official corporate body in a foreign country, and not a search for short-term profits.
According to Korea Eximbank, the total amount of such investments by all local SMEs increased by 14.3 percent to $1.55 billion in Q3 2016 compared to Q3 2015.
By Kevin Lee (email@example.com)