South Korean auto brands now firing on all cylinders worldwide

A South Korean car parts company developing autonomous driving technology has set a new record in overseas sales.

And if you are still clueless about its identity, it is Hyundai Mobis, which logged $1.7 billion worth of orders for high-tech automotive parts from non-Korean customers last year. These parts include sensors, display and lamps used for autonomous and electric cars.

The Hyundai affiliate has rapidly expanded its global presence thanks to growing demand from overseas electric vehicle companies. Orders totalled $500 million in 2015, doubled to $1.2 billion in 2017, and soared 40 per cent in 2018.

With sensor development emerging as a battleground for electronic parts manufacturers, Samsung Electronics has chosen image sensors as its next-generation business product after memory semiconductors. This is being done to target the autonomous vehicle market. Samsung had earlier signed a contract with Tesla to supply image sensors. Likewise, LG Electronics, which created an autonomous navigation task force in end-2018, is increasing its investment in vehicle sensors.

Welcome to the new world of South Korean majors moving into the fast lane. Long ranked as one of the world’s largest auto producers, behind the US, Japan and Germany, it ceded that place to China and India in 2017. Mexico threatened to overtake it in 2018.

Widening horizons

Intent on catching up, South Korean electronic companies are now producing automotive components other than semiconductors and batteries. This has paved the way for manufacturers to be battle-ready for next generation auto technology such as automated driving and connected vehicles. Kim Hyun Chong, Minister of Trade of South Korea, who was in Mumbai recently, maintains the potential is huge. “Increasingly we will have battery operated vehicles on our roads, whether it is pencil or hydrogen (battery),” he said.

According to him, over 60 per cent of the devices and components used in autonomous vehicles, or those operating on electricity or hydrogen, are bound to have new parts like fuel cells or semiconductors. “This is the value add we are looking at,” he said.

While driving home the point that the auto industry was facing its most profound transformation, going from traditional internal combustion engine vehicles to electric motors or replacing drivers with autonomous vehicles, Chong said those companies and even countries that will provide components for electric and autonomous vehicles of the future “will be at a distinct advantage”. South Korea has taken a major leap in this direction, said the minister. What has aided the move is being “an integral part of the global value chain.”

South Korea’s LG Chem is already producing battery cell technology for Ford’s electric vehicle programme. Ford’s objective is to reduce cobalt in its nickel-manganese-cobalt batteries to 10 per cent or lower.

LG Chem also supplies the battery pack for GM’s Volt, its all-electric car. It uses a proprietary polyolefin as the polymer film separator inside each one of the 288 individual lithium-ion battery cells.

Though Ford and GM are essentially buyers of battery cell technology, the road ahead is likely to involve collaboration through the supply chain, including battery cell producers and raw material suppliers.

Plastics will also become part of this ecosystem. Frost & Sullivan has estimated that plastics used in electric vehicles would see “tremendous growth” with the need to reduce weight for better performance. Between 2010 and 2017, the value of plastics in EVs grew from $500,000 to $73 million.

India a key aspect

South Korea has accordingly changed gears and is looking to interact with more Indian companies. Hyundai has already stepped on the gas and plans to begin manufacturing its Kona electric SUV at its Chennai factory by the second half of 2019.

“India possesses numerous strengths that differentiate it from other countries. We are working towards increasing interactions, bilateral trade and other relationships going forward,” said Chong.

Insisting it was time “to strengthen our partnership in the manufacturing area, since the automotive industry will be forced to change 60 per cent of all its components and products soon,” he said the time had come to expand cooperation in the cutting-edge industry.

Chong also praised the Centre’s “swift recommendation of ideas” proposed to create an industrial canvas between companies in a centrally-located area as part of its effort to incorporate a business-friendly environment.

India and South Korea have expanded their bilateral cooperation to diverse sectors. “Today, trade volume between the two countries has surpassed $20 billion but there is so much room to further expand,” insisted Chong.

Both sides have pledged to increase bilateral trade to $50 billion by 2030. The Minister hoped that trade flows would be driven by large corporates setting up units across both markets primarily in the automotive and electronics sector.

Enter Kia

In the auto space, the two big investments have come from long-term resident, Hyundai and group company, Kia which is ready to roll out its first SUV in the second half of this calendar. Hyundai has been around for two decades now and is the closest rival to market leader Maruti Suzuki.

Similarly, if the footfalls at its pavilion in the 2018 Delhi Auto Expo are any indication, Kia is not going to have any problem when it comes to brand value. In all fairness, it was its predecessor Hyundai that played a huge role in showcasing Korea’s prowess in the automotive space.

At the time of its entry in the late-1990s, there were perhaps not too many people who knew what Hyundai represented. However, once the Santro made its debut and people queued up for the ‘Tall Boy’ offering, Hyundai had well and truly arrived.

It was also not the sole Korean automotive brand at that point in time. Daewoo had also caught the fancy of the market with its Cielo and, later, the compact Matiz. Like Hyundai, Daewoo was set to build a connect with its customers here but the parent company in Korea was rapidly heading towards bankruptcy.

It was only a matter of time before this hit the Indian operations and the Surajpur facility shut shop in 2002. Daewoo was acquired by GM, which leveraged the platform in Korea to build its business in Europe.

Kia promises plenty as a premium brand known for its stylish offerings. Young Indians who travel around the world are doubtless familiar with Kia and will be eager to lay their hands on its products when they debut here.

The other automotive brand, albeit smaller, is SsangYong Motor, which was acquired by Mahindra & Mahindra in 2011. The Korean auto-maker had gone through its ownership upheavals prior to this and was clearly skating on thin ice when M&M entered the picture. Today, it is stronger and playing a key role with its Indian owner in leveraging joint platform competencies for India and the rest of the world.

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