It was found that most domestic auto parts companies have no sales in the future car industry, and thus, intensive support will be needed for the transition to future cars.

On the 11th, the Korea Automobile Research Institute (KARI) announced the 2022 3rd quarter KATECH issue report with the topic of ‘Analysis of the current status of domestic parts companies’ transition to future vehicles and implications.’

In Hanjaeyeon's 2021 survey of auto parts companies, some of the current status of companies related to the transition to future vehicles was identified.

Among domestic auto parts companies, the number of future car companies is 1.0% of the total, the industry related to major future car parts is 1.1%, and sales are 0.5% of the total, so there is still a long way to go.

■ Survey on the status of parts companies

The total number of companies surveyed was 10,212, and 2,120 companies participated in the survey.

▲ Current status of auto parts companies (Data: Reprocessed from Hanjayeon data)

First, let's look at the general status of domestic automobile parts companies. Among the 10,212 companies, △Car body parts were the most numerous with 1,977 companies (19.4%), followed by △Engine-related parts with 1,469 companies (14.4%) and △Power transmission devices with 1,393 companies (13.6%).

The number of major future vehicle parts companies was 104, accounting for only 1.0% of the total.

The total number of employees was 244,878, and similar to the number of companies, △body parts accounted for 25.5%, △power transmission devices accounted for 16.0%, and △engine-related parts accounted for 13.1%.

The industry related to major future vehicle components accounted for 1.1% of the total, with 2,581 people, similar to the number of companies.

Sales totaled 75.547 trillion won, with △body parts accounting for 18.704 trillion won, or 24.8%, △power transmission devices accounting for 13.3%, and △engine-related parts accounting for 12.4%.

Future vehicle key components accounted for 0.5% of the total at 380.2 billion won, showing a low proportion compared to the number of companies or employees.

This means that sales per company are still low, and it can be inferred that full-scale sales are not being generated in the future car-related industry.

What is unique is that companies in the electronic devices, steering and suspension systems show a higher sales ratio than the number of companies in other parts groups.

In particular, electronic devices account for 1.8% of the number of companies, but sales are about twice as high at 3.6%.

This means that sales per company are about twice as high as in other parts groups, and it can be thought of as proof that even existing car models, not just future cars, are using more electronic devices to implement functions such as autonomous driving.

■ Industrial structure

Decrease due to transition to future vehiclesThe military industry (engines, power transmission, etc.) accounts for 43.4% of all parts manufacturers based on the number of businesses, 44.1% based on employees, and 41.6% based on sales.

In terms of sales volume, small businesses with less than 10 billion won account for 84.1% of businesses and 41.2% of employees, and businesses at the subcontracting stage of 2nd or higher account for 88.3% of businesses and 68.3% of employees. Therefore, it can be seen that the industrial structure has the characteristics that can be greatly affected by the transition to future vehicles.

■ Affiliated Research Institute

The characteristics of major future car component companies are clearly revealed in whether or not they operate affiliated research institutes.

While the average ratio of affiliated research institutes is 13.9%, major future vehicle component companies show a ratio of 67.1%.

In other words, research personnel are essential for developing key components of future vehicles, and it can be assumed that there will be a large demand for R&D experts for this purpose.

■ By industry

We also conducted a survey on the level of preparation for future vehicles by parts companies.

Of the total, 72.6% of companies selected ‘no current plans’, and 81.8% of major future vehicle component companies selected ‘producing related products’ and 12.7% selected ‘developing related products’, indicating that 100% of companies are producing or developing.

Among companies without current plans, about 60.7% say that they need to enter the future car business, but they are unable to enter the future car market due to lack of funds (42.5%) and lack of information (32.2%). It was confirmed that a plan was not being established.

Among companies without plans, 39.3% responded that there is no need to enter the future car market, and the opinion that the current main product has a good future outlook was the most common response at 79.2%.

Other than that, 10% of respondents said they would focus on businesses other than automobiles.

■ By contract stage

As you go from tier 1 to tier 3 suppliers, their readiness for future vehicles becomes increasingly vulnerable. Tier 1 and 2 suppliers show relatively similar numbers, but only about 30% of them have entered the production stage, and over 50% of companies have yet to even establish a plan.

■ Manpower Acquisition Method

It was found that parts companies are mainly retraining their existing workforce to secure personnel related to future vehicles. In the case of management/sales personnel, production/technical personnel, approximately 70% are secured through retraining of existing personnel using internal and external resources.

Research personnel accounted for 35.3% of new hires, but 38.5% of respondents said there was no way to do so.

Considering that this answer is almost 0% in other industries, it can be thought that securing R&D personnel related to future cars will not be easy.

■ R&D personnel

If we look at only the R&D personnel in detail, major future car component companies are hiring 78.4% of their personnel through new hires, which is more than double the average of 35.3.

In other words, it can be assumed that it is difficult to secure existing personnel through retraining or that there is an absolute shortage of personnel, so new hiring is necessary.

Among other component groups, the electronic device sector showed a high rate of new hiring at 59.3%.

■ Factors hindering development and development

The lack of funds and professional manpower were selected as the top priorities as obstacles to fostering and developing the automobile parts industry.

▲ Factors hindering the development and promotion of the automobile parts industry (Image source: Hanjayeon)

Lack of funds was 49.2%, and lack of manpower was 25.5%. It was shown that the funding shortage was as high as 75% when including the second rank.

In relation to this, the items that the government should prioritize in support were improvement of financial systems in first place and training of professional personnel in second place.

Hanjayeon emphasized that the implications of this survey are that smaller companies and lower-level subcontractors are still less prepared for future cars, and that these companies face many difficulties in preparing for the future car era on their own.

In the domestic auto parts industry, second- and third-tier subcontractors account for a significant portion, 89% of businesses and 68% of employees, and thus have a structural characteristic in which the successful transition of these companies to future vehicles can have a significant impact on the national auto parts industry.

At the end of the investigation report, Hanjaeyeon stated that it is necessary to focus on supporting second- and third-tier subcontractors, who are vulnerable to the transition to future cars but account for a significant proportion of employment, and that to this end, the government, automakers, first-tier subcontractors, and related organizations should not spare comprehensive support.