Hyundai Motor founder Juyung Chung once remarked that “cars fly the national flag and are a measure of the nation’s industrial progress”. But even the revered Korean industrialist started out assembling cars for Ford before going on to produce vehicles that could compete on the global stage.
Today, Hyundai is the world’s fifth-biggest carmaker by sales. But it is among a number of South Korean brands, including LG and Samsung, that are pivoting to secure a future in the auto sector: supplying components and manufacturing services to other carmakers.
At stake for some of the country’s largest companies is their position in a global electric vehicles market forecast to grow to $800bn by 2027, from $162bn in 2019, and a self-driving cars industry projected to grow tenfold to more than $550bn over the next five years, according to Allied Market Research.
Investors have piled into companies with exposure to electric vehicles, batteries and self-driving cars. Hyundai and Kia shares staged a record rally last month after confirmation of initial talks on a vehicle tie-up with Apple — though the gains retreated after Hyundai poured cold water on speculation that investment was imminent.
However, some analysts worry that Korea Inc risks veering back down the value chain into commoditised component production and lower-margin manufacturing.
“Hyundai is likely to end up being an OEM [original equipment manufacturer] for Apple-branded cars, just like Foxconn for iPhones,” said Kim Young-woo, a Seoul-based analyst at SK Securities, referring to the Taiwan-owned group that assembles Apple’s smartphones in China.
Sea-jin Chang, a professor at the National University of Singapore who has written extensively about corporate history in Asia, said Hyundai had to weigh the impact of potentially losing a partner on the scale of Apple to a competitor.
“If Hyundai doesn’t do it, somebody else will,” Chang said.
While the technology changes roiling an automotive industry in transition pose an existential threat to incumbents, they are creating opportunities for new players.
The entry of cash-rich tech groups including Apple, Google and Amazon as well as China’s Baidu has been validated by Tesla’s surge to its position as the world’s most valuable carmaker. The US electric carmaker sold nearly half a million cars in 2020 and now has a market value of over $800bn.
Hyundai, which has a long-term plan to reinvent itself as a “mobility service provider”, declined to comment on its strategy beyond saying it was “open to collaborate [sic] with any capable and innovative partners around the world”.
It is developing its own self-driving technology platform and has invested in more than 20 companies over the past five years, including a $4bn joint venture with Dublin-based Aptiv. Hyundai aims to boost electric vehicle sales by 60 per cent this year to 160,000, and has a target of selling 1m vehicles annually by 2025.
Using the Kia brand to manufacture cars for other companies could help protect the integrity of the group’s main marque. Hyundai’s vertically integrated model would also suit US tech groups with notoriously protective supply chain practices, such as Apple.
The partnerships could help Hyundai diversify into areas such as robotics or even flying vehicles, said Chung Sung-yop, an analyst at Daiwa Securities.
Beyond Hyundai and its parts-making affiliates, South Korea is the world’s largest producer of batteries for electric vehicles via LG Chem, Samsung SDI and SK Innovation.
Its tech groups, including Samsung Electronics and LG Electronics, have captured corners of the components market. For LG, a particular focus is interiors.
“When you have a self-driving car, the entire cabin changes to something else because you don’t have to drive. There, we see tonnes and tonnes of real business opportunities,” said IP Park, LG’s chief technology officer.
But despite South Korea’s deep electric vehicle supply chain of manufacturers, which make high-tech products including battery technology, computer chips and in-car displays, the future is the software for turning electric cars into autonomous vehicles, said Kim of SK Securities.
“Developing EVs and self-driving EVs are two different stories,” he said.
According to Chang, the corporate historian, the South Korean auto sector has been left playing catch-up because of decades of failure to invest in software development.
“The main missing piece of the puzzle is the operating system — the software which integrates all these components and optimises the car’s performance. Korean companies don’t have a strong advantage in software,” he said.
Yet even if Korea Inc stopped making cars, it is well placed to benefit as electric vehicle technologies become mainstream, said Chan Lee, a managing partner at Petra Capital Management, a hedge fund in Seoul.
Investors are banking on that prospect. LG Electronics shares gained a third in December after agreeing a $1bn electric vehicle parts-making joint venture with Canada’s Magna International.
“The dominant view has been that traditional carmakers will be forced out of the market because of low margins, or they will become contract manufacturers for IT giants,” said Im Eun-young at Samsung Securities.
But electric vehicle assembly is much more complex and involves more complicated technologies than smartphones, which negates the idea that carmaking OEMs would be a low-margin business, she said.
“A mobility contract manufacturer will be more like TSMC rather than like Foxconn,” she said, referring to Taiwan Semiconductor Manufacturing Co, which dominates the global contract chipmaking market.
Additional reporting by Peter Campbell in London and Patrick McGee in San Francisco
"electric" - Google News
February 09, 2021 at 07:01AM
https://ift.tt/2N95mLK
Korea Inc seeks to corner global parts market for electric vehicles - Financial Times
"electric" - Google News
https://ift.tt/2yk35WT
https://ift.tt/2YsSbsy
Bagikan Berita Ini
0 Response to "Korea Inc seeks to corner global parts market for electric vehicles - Financial Times"
Post a Comment