On July 4th of this year, experts took a step forward and warned the South Korean automobile industry that there will be a rapid decline in sales and the industry itself at a forum organised by the Korean Automobile Manufacturers Association (KAMA). Mr. Kim Joon-kyu, Head of research study at KAMA had pointed out that South Korea is only one among the top 10 leading world manufacturing countries that has reported a decrease in production for 4 years in a row now. In the case of Hyundai Motors, Kim had criticised them saying labour costs are very high as compared to direct competitors such as Toyota and Volkswagen but on the other hand, labour hours are 11 to 26 percent higher per hour than Toyota, Ford and GM.
The decline in the car industry are already showing its effects as employment is also on the decline. In 2017, the number of employees were at 401,00 but by April this year it is only 385,000. In the last year alone, 20 top-tier component producing companies went bankrupt.
Experts are relating this decline to a lower level of technology adopted by the car manufacturers. The Research and Development (R&D) costs to revenue ratio is only 2 to 3 percent in South Korea which is approximately 1/3rd of the advanced countries. The country also lags behind advanced countries in the usage of electric variants and its electric vehicle (EV) technology is also sub-par as compared to competing nations. It is also dependent heavily on import of core components for their hydrogen powered electric cars.
The trade dispute between the United States and China has also slowed down most markets around the world and South Korea is definitely one of them.