Automobile Industry Status

Manufacturers in Korea ( 2008 )

No. of Production Exports Turnover

Employees (Bil.Won)

1,674 1,099 32,190

56,020

1,055 739
16,382
32,720

915
703
17,198 12,311

7,154 81 43 2,495

188 95 3,705
7,563

Thousand Cars Billion KRW

 Automobile Industry Status

Production and Sales Volume

Saturated domestic market but still more room

Trends in Automobile Production and Sales

(Unit :thousand) 4086

3699 3840 3826
3469
3115 2946 3148 3178
2586 2648 2847 2683
2380
1676 1501 1622 1815

1430 1451 1510 1318

1094 1143 1164 1219 1154

2000 2001 2002 2003 2004 2005 2006 2007 2008

Production Exports Domestic Sales

 Automobile Industry Status

Where Production Facilities

City
Annual production capacity Sohari
350,000
Inchon
500,000 Pyongtaek
220,000
Hwasung
600,000 Daegu
40 suppliers
Asan
300,000
Ulsan
1,500,000
Seosan
150,000

Gunsan Busan
300,000 250,000
Changwon
240,000
Jeonju Gwangju
125,000 400,000
Changwon
Engines
 Automobile Industry Status

Global Presence & Changes

Global Presence

Acquired controlling share (37.3%)

of Kia Motors (Nov. 1998)
Strategic Alliance

51% Merged w/
Daewoo Motor

WHO?? Share
acquisition

80% Merged w/
Samsung Motors
 Automobile Industry Prospects

Shares of the Global Players

Restructuring in the Global Auto Industry

-Toyota now No.1 in the world
- Old days for BIG 3 - GM Bankrupt/Chrysler merged to FIAT
- Rise of Korean cars in the U.S. Market
2000 2007 2000 2007

20.3% 13.1% 4.3% 5.8%

14.1% 10.7% 10.4% 13.3%

Source: FOURIN
Change in Sales in the U.S. Market in 2007 (%)
Source: KARI 3.0
Hyundai
Note: Y-o-Y % Change
Nissan 4.8
Honda 2.8
Toyota 3.1
-3.1 DaimlerChrysler
-12.2 Ford
-6.0 GM
-10 -5 0 5
 Automobile Industry Prospects

New Waves in the Auto Industry

Paradigm Change

Global warming
Environment More Competition
New energy development
for highly efficient
More
& environmentally
Cooperation
Safety restrictions friendly car with
competitive
Regulation CAFE(Fuel Efficiency) §New energy car
§Hybrid parts
Emission control §Fuel cell car supplier

Application of
Customer needs for convenience
More electronic devices Intelligent Systems
New Trend Telematics Technology
Multimedia
Internet
 Automobile Industry Prospects

SWOT Analysis of Korean Auto Industry

Ø Price Competitiveness:
- Highly-skilled workers, Ø Brand Awareness
- low-cost parts & materials Ø Labor union issues
Ø Diversified export market Ø Immature Parts & raw material industry
Ø Aggressive Marketing

Strengths Weaknesses

Opportunities Threats

Ø Successful launches on-site production Ø Saturated domestic market

Ø Geographical proximity to China’s markets ØHigh dependency on overseas market
Ø Potential market of ASEAN Ø Technology gap to advanced countries
 Automobile Industry Prospects

Major Factors Affecting Market

Outlook for 2009

Positive Negative

•Economic depression
- Newly released models
Domestic - Potential replacement demand
•Strong competition by makers
(Price cut, Low interest rate Financing)

Export - Demand in emerging market •Weakened price competitiveness

( weak Korean currency )
- Improved quality & performance
• World Financial crisis
 Parts Industry

General Overviews

Decrease in OEM Share & Increase in Export in Total Sales

Number of 1st Tier Suppliers by Auto Maker
Renault- Daewoo Tata-
Year Hyundai Kia GMDAT Ssangyong
Samsung Bus Daewoo
Total

1,777
2006 366 372 304 220 133 186 196 (902)*

2008 355 359 307 222 141 187 204 1,775

(889)*

•Number of actual suppliers/ Number of FDI companies : 170 among 889

Total Sales Volume in Korean Auto Parts Industry

(Unit: US$ mil.)
Sales Volume
Year Total
OEM A/Market Exports
2006 37,559 (78%) 2,441 (5%) 8,002 (17%) US$ 48,002
2007 38,641(77%) 2,319(5%) 9,231(18%) US$ 50,191
2008* 28,129(77%) 1,688(5%) 8,036(18%) US$ 37,852*

* Note : 37.5% $ appreciation *source : KAICA

 Parts Industry

Business Climate of Korean Auto Parts Industry

Threats of Entry
§ Large-scale Strong foreign
companies
§ Rise of China with low price

Buyer’s Bargaining Power

Rivalries
Supplier’s Bargaining Power § Increased cooperation
§ New entrance of
§ Raw material price up § Continuous requests for
potential suppliers
§Bigger suppliers bigger power cost reduction & quality
§ Different sizes
§ Big volume order

Threats by Substitutes
§ New types of vehicles (HEV)
§ Technology integration
 Parts Industry

Global Auto Parts Manufacturers in Korea

41 of the world’s 50 largest auto parts

suppliers have a presence in Korea in 2008
 Parts Industry Prospects

Growth Factors of Korean Auto Parts Industry

Positive Factors
Negative Factors

OEM •Big Volume of domestic production

• Orders from major global makers
•Encroachment by Chinese suppliers
•Quality & price competitiveness
•Weak Technology
•Sourcing from low cost

After
Market • More cars on the road
• Demand to authentic parts
•Increased durability
•Less car accidents
•Low price generic parts
 Investment opportunities

Competitiveness of the Korean Auto Industry

World Automobile Production Ranking

Korea’s Automotive Industry

• No. 5 in the world in 2008

total production of 3.8 Mil.Units
Ranking Country Production
• 5.4% share of the global
production 1 Japan 11,563
2 China 9,345

3 USA 8,696

4 Germany 6,045

5 Korea 3,826
6 Brazil 3,220
Unit: thousand vehicles
 Investment Opportunities

Automobile Industry in Korea

GDP Portion
2.4% /3.8%
Leading industry with semi conduct Employment
Auto/Semi Conduct (2006) 1.09% /1.07%
Export
9.4% /10.25%

R&D fostering environment

Company friendly policy

Strong Government
support Road Length(Km)
52,264(‘85) 103,019(‘07)
Road pavement
49.8% (‘85) 77.6%(‘06)

Global R&D

Globalization Global Parts sourcing

Worldwide marketing
 Investment opportunities

Vision for Future Vehicle

Big 4 in the world

Vision through developing eco-friendly vehicle
ØBalanced growth both OEM and parts supplier
through developing technology of eco-friendly vehicle
ØSecure the sustainable growth drive engine for Korea Auto
industry to be the global best

ØDevelop and commercialization of system technology of

parts for hybrid and fuel cell vehicle

Strategy Ø Global supplier’s base of the parts for hybrid and fuel cell
vehicle

ØImprovement of living condition through wide spread of

eco-friendly vehicle
 Investment Opportunities

Steps of Korean Automotive Industry

KD Assembly
stage
Development
stage of
Proprietary models

Early stage of mass

production/export

Development stage of
independent models

Improvement of technology
and open market
 Investment Opportunities

Policy Direction for Automobile Industry

Automobile Industry
Policy Direction

vDevelop innovative auto technologies such as

‘telematics’ and integrated control systems
increasing safety and comfort.
vSecure source technologies for hybrid and
fuel-cell vehicles.
vProvide incentives for eco-friendly vehicles.

Parts & material Industry

Policy Direction

vDevelop technologies for imported parts and

materials.
vConstruct business-friendly infrastructure.
 Investment opportunities
Government Initiatives for Development

Top 4 in the World by 2015 •Source : Ministry of Commerce, Industry and Energy,
‘2015 Automotive Industry Policy Direction’, ’05.11.15

Vision
Create a ‘Made in Korea Premium’ in the Global Automobile Industry
Play a Leading Role in Key Industries in the US $30,000 GDP Era

Target 2007 2015

Automobile production
• Domestic • 4,086,308 cars • 5,200,000 cars
• Overseas • 1,162,000cars • 2,400,000 cars

Global market share • 5.8% (5th) • 8% (4th)

World’s top 100 auto

parts suppliers • 2 • 12

Automobile exports • US$ 37billion • US$58 billion

Auto parts exports • US$ 12.4billion • US$16 billion

No. of new jobs • 264,000 (2006) • 280,000