Auto parts industry pleads for support amid costly, complex EV transition

KAIA holds field forum with parts makers in Pyeongtaek

Firms cite investment burden, talent shortage in EV shift

Industry calls for tax support to preserve domestic production base

'Parts ecosystem must stay competitive for auto industry to survive'

Participants pose for a group photo at the field forum on the automotive ecosystem transition held at Hyorim Precision Engineering in Pyeongtaek, Gyeonggi Province, on Monday. [Korea Automobile & Mobility Industry Association]

South Korea's auto parts industry is calling for government support, saying it faces market uncertainty, a talent shortage and a heavy investment burden all at once as it tries to shift toward next-generation vehicles. Industry representatives argue that because the pace of electric vehicle adoption directly affects not only automakers but also the production structures and order books of their suppliers, institutional backing is needed to preserve the domestic manufacturing base.

The Korea Automobile & Mobility Industry Association (KAIA) said Tuesday it held a field forum titled "Parts Industry Forum for Automotive Ecosystem Transition" at the main conference room of Hyorim Precision Engineering in Pyeongtaek, Gyeonggi Province, on Monday. The forum was organized to hear firsthand accounts of the challenges parts makers face in transitioning to next-generation vehicles and to identify policy priorities for strengthening the competitiveness of the domestic auto production base and parts ecosystem.

Attendees included KAIA Chairman Jeong Dae-jin, Korea Auto Industries Cooperative Association Chairman Lee Taek-seong and Korea Automotive Technology Institute Vice President Im Gwang-hun. Senior officials from major parts companies also attended, including KG Mobility Partners, Taesang, Dawusan, Eugene SMRC, Hyorim Precision Engineering, Yungjin Enterprise, Seojin Cam, Kongsberg Automotive, Korea Fukkoku and Schaeffler Ansan.

Before the forum, participants toured Hyorim Precision Engineering's production lines to observe the state of auto parts manufacturing and the company's preparations for the EV transition. The forum that followed focused on the difficulties traditional internal combustion engine parts makers face as they move into next-generation vehicle sectors such as electrification and autonomous driving.

Parts makers said the direction of EV market growth remains unclear and that intensifying competition from rapidly expanding Chinese EV manufacturers is adding to the pressure. Participants said small and mid-sized parts companies cannot sustain next-generation vehicle investment on their own, particularly given the difficulty of securing skilled workers.

The industry particularly called for a consortium-based transition support framework that brings together automakers, parts suppliers and materials companies. Participants said technology roadmaps, market and patent information, and testing and certification infrastructure should be bundled together to help existing internal combustion engine parts makers move smoothly into the next-generation vehicle sector.

Calls for expanded fiscal and tax support were also raised. Participants said the government should create flexible support measures that parts companies can draw on during both the development and mass production stages, and that domestic parts usage should be factored into EV support programs to encourage domestic production and reinvestment. Some pointed to China's active use of tax incentives, financing and deregulation as a reference for building EV competitiveness.

KAIA Chairman Jeong said the government should "swiftly introduce a domestic EV production promotion tax regime to maintain and expand the domestic production base, thereby supporting the parts industry's electrification transition, securing orders and building capacity for future vehicle investment."

He added that "as demands for carbon emissions data from production processes and supply chain due diligence are growing, particularly from the EU, the burden on parts makers is increasing — support such as building a shared data platform for the automotive industry is also needed."

Korea Auto Industries Cooperative Association Chairman Lee said the auto industry can maintain its competitiveness only when automakers and parts suppliers grow together, and that it is important to ensure domestic production and investment continue through the EV transition so the parts industry ecosystem remains stable. He added that he hopes policy support will adequately reflect the on-the-ground difficulties of the transition, given that many parts companies are simultaneously maintaining existing production systems while pursuing investment to prepare for next-generation vehicles.

Korea Automotive Technology Institute Vice President Im said the industry must do everything possible to secure the competitiveness of the parts ecosystem, which is the core foundation of the next-generation vehicle transition. He added that R&D investment in AI, autonomous driving and electrification should be expanded to build technological competitiveness, and that the next-generation mobility industry ecosystem should be upgraded by establishing a linked system connecting technology development, demonstration and commercialization.

Park Gyeong-bae, chairman of KG Mobility Partners and a representative of the parts industry at the forum, said parts companies must continue research and development and capital investment to transition to next-generation vehicles, but that the investment burden is growing due to market uncertainty and deteriorating profitability. "Small and mid-sized parts companies in particular are struggling to secure the funding needed for transition investment," he said.

He added that if a production-linked support system such as a domestic EV production promotion tax regime were put in place, "it would give companies a more stable basis for drawing up investment plans and an opportunity to move more actively on the next-generation vehicle transition."

KAIA said it plans to continue identifying support priorities for the next-generation vehicle transition — including the introduction of a domestic EV production promotion tax regime — based on the views gathered at the forum. The association said it will also strengthen cooperation with the government and relevant agencies to discuss ways to bolster parts makers' investment capacity and preserve the domestic production base.

kwater@heraldcorp.com