Recently, domestic parts companies are showing improvement in management indicators and R&D investment, but despite the improvement in quantitative and qualitative indicators, they are still analyzed to be inferior to global competitors. In the meantime, issues such as the recent slowdown in sales growth, global competition, and intensifying protectionism have come to the fore, and it has been found necessary to establish a multi-faceted response strategy by the private sector and the government to restructure and advance the parts industry.

Vol. 1 of Industrial Analysis recently published by the Korea Automobile Research Institute. According to 'Changes in the Environment and Response Directions of the Parts Industry', major domestic auto parts companies are showing improvement in terms of management performance and technology investment, but are still at a disadvantage compared to global competitors.

It is pointed out that a strategic response from the private sector and the government for structural advancement is urgent due to complex factors such as a shift in the industrial paradigm and intensifying protectionism.

The global finished vehicle market has shown a rapid recovery since the pandemic, but its growth has recently slowed sharply.

Global light vehicle sales in 2024 are expected to reach 88.83 million units, up 2.2% year-on-year, but this figure is significantly lower than the 2023 growth rate (10.2%).

Due to the US' high tariff policy and the slowdown in global economic growth, sales growth in 2025 is expected to be limited to 1.1%.

Among these, electrification and digitalization have become key transformation trends in the automobile industry, and in particular, the introduction of artificial intelligence (AI) is spreading beyond vehicles to the entire supply chain.

Global electric vehicle (BEV+PHEV) sales are expected to increase by 26.1% in 2024, with the Chinese market growing by about 40% year-on-year, rapidly emerging as a key region for electric vehicle distribution.

The domestic automobile industry experienced negative growth in 2024 with a 6.5% decrease in domestic sales, a 0.6% increase in exports, and a 2.7% decrease in production, but major parts companies (based on 213 companies) recorded improved performance in terms of operating profit and R&D investment.

In 2024, operating profit increased by 16% year-on-year, and R&D investment also increased by 13.5%, recording a total of KRW 4.8894 trillion, and the R&D intensity rose to 3.92%.

Despite these improving trends, however, key indicators remain below global levels. />
Among the world's top 2,000 companies selected by the EU, the average operating profit rate of auto parts companies is 7.5%, while in Korea it is only 3.62%, and the R&D intensity is also lower than the global average of 4.7%.

The number of research personnel in the automobile industry has also started to decline.

As of 2023, the number of researchers in the domestic automobile industry has decreased by 8.8% compared to the previous year, and the proportion of total research personnel is also continuously decreasing.

The reasons are analyzed to be the exodus of research personnel and the gap between companies, which may lead to a decline in industrial innovation capabilities.

The gap is widening, especially as technological competition with China intensifies.

China is investing heavily in R&D and nurturing talent at universities in its automobile and battery industries, and some companies are even running in-house postdoctoral research programs.

The report points out that the domestic auto parts industry needs a structural response considering the complex threat factors such as slowing sales, increasing costs of future cars, intensifying global competition, and geopolitical tensions.

Accordingly, the suggested response strategies are as follows: △ Focus on strengthening production efficiency and innovation capacity rather than rapid market diversification, △ Fostering promising companies by establishing an efficient government support system, △ Promoting cross-industry collaboration and partnerships between companies, and △ Expanding the multidisciplinary professional training and retraining system centered on AI and SW.

In particular, policy support should be provided to companies with growth potential and innovation potential based on a selection and concentration strategy, and it is also necessary to review a linkage system for industrial hubs such as the metropolitan area, northern Chungcheongnam-do, and Daegu.

The domestic automobile parts industry is at a turning point in the industrial paradigm shift.

The report states that “structural transformation will be achieved through the organic combination of technology, talent, and strategy.” He emphasized that “we must push for this,” and suggested that public-private cooperation is becoming more important to improve the constitution of the domestic industrial ecosystem and secure competitiveness centered on future cars.