Foreign-owned auto component manufacturers are establishing business relations with Korea because Korean markets offer better profitability, while maintaining quality.
When the world is looking at the emerging economies of Brazil, Russia, India, China and Mexico, foreign-owned auto component manufacturers are targeting South Korea. The South Korean economy has emerged as an important destination for global auto component manufacturers. However, the million-dollar question is why will any auto component manufacturer target South Korea, an unattractive market in terms of its size and economy, which is prone to cyclical slowdown? Despite its unattractiveness, almost all foreign auto component manufacturers have established their base in Korea to leverage the conditions that will help them provide a better mix of cost and quality.
The Korean automotive sector contributes significantly towards the development of the economy as it integrates both backward and forward integration to a large extent. The Asian financial crisis (1997-98) had damaged the Korean automotive industry severely, resulting in making its assets cheap. Consequently, the weak mid-size Korean companies were taken over by foreign companies.
The growth of Korean automakers in the global market has fueled the growth of Korean auto component makers. There are more than 4,000 companies operating in the fragmented auto component industry. Most Korean auto component makers are related (subsidiaries or sister concerns) to the automakers of the same group. |
