China May Hit Korean Auto Hard in 5 Years - Here We Go

Seoul October 31, 2004; Park Chung-a writing for the Korea Times reported that Korea's car industry is expected to meet fierce export competition in five years as Chinese car export industry grows rapidly.

According to research fellow at the Korea Institute for Industrial Economic and Trade Lee Young-joo, China has been focusing on car exports for the last 2 to 3 years and Korea's car industry is expected to face threats from export competition in the auto parts industry in the mid- and long-term.

"China's auto parts export has recorded $2.3 billion through July this year, reducing the gap between Korea, which has exported cars worth $3 billion in the same period. In order to find a breakthrough from over-supply and sluggish consumption, China is likely to continue to focus on exports," Lee said.

"Within 5 years, Korea should secure the competitive export power of small- and mid-sized firms in the auto parts industry before China joins active export competition," he added.

According to the report, due to Korea's high dependency on China with its domestic auto parts export there accounting for 23 percent of its total auto parts export abroad, the expansion of China's export is expected to influence Chinese domestic consumption, affecting Korean small- and mid-sized firms doing business in China.

As for ways to secure competitive power in the auto parts industry, Lee suggested unearthing new items and advancing into foreign markets such as developing export structure focusing on core auto parts, increasing export to a third country using China as a gateway and supporting export industries of promising items.

The Chinese government decided to expand its export of automobile industry in April from $70 billion ~$100 billion. It also established its goal to increase the proportion of automobile industry exports against the total export from 1 percent to 8 percent in its tenth five-year plan for the 2001-2005 period.

KOTRA also saw China's aggressive plan for increasing exports in Iran as a warning for Korea's car export there.

KOTRA announced Sunday that the Iranian government has recently permitted import from "Jili," a Chinese automobile company. According to Iran's Auto Owner's Association (IAOA), it has imported 410 units and will further bring in about 2,000 units this year.

Experts say that because Iran's current ratio of car owners (one out of 21 people) is much smaller than that of advanced countries (one out of two) and a quarter of the cars owned in Iran are older than 25 years, Iran's market growth potential is evaluated to be large.

China's Chery Automobile Co. has also made inroads into the Malaysian market. Malaysia's Alado Corp Sdn Bhd has announced that through cooperation with the Chinese company, it will produce six car models within two years. Chery QQ mini car and the B14MPV model will be launched in December and next year.

Before this, China Motors, located in Arizona of the Unities States, announced in June that it had concluded a selling contract with car dealers from Arizona and California.

The main car types that the Chinese company focuses on are medium-sized sedans called Solo and Merrie, small-sized pick-up trucks called Sailor and Deer, and Safe and Sing, which are small Sports Utility Vehicle-types. All of them are currently being produced and sold in China.

The price of the Chinese cars in the American market in its early period is expected to be fixed as $9,000- $15,000, which is 20 percent-40 percent cheaper than its Japanese and Korean counterparts.