Automobile Industry Status

Manufacturers in Korea ( 2008 )
No. of Production Employees Exports Turnover (Bil.Won)

56,020

1,674

1,099

32,190

1,055 32,720 915 17,198

739

16,382

703

12,311

7,154 7,563

81 188

43

2,495 3,705 Billion KRW

95

Thousand Cars

Automobile Industry Status

Production and Sales Volume
Saturated domestic market but still more room
Trends in Automobile Production and Sales
(Unit :thousand)

3115 2946 3148 3178 1676 1501 1622 1815 1430 1451 1510 1318

3469

3699 3840

4086

3826

2847 2683 2586 2648 2380

1094 1143

1164

1219

1154

2000 2001 2002 2003 2004 2005 2006 2007 2008

Production

Exports

Domestic Sales

Automobile Industry Status

Where Production Facilities
City Annual production capacity

Sohari 350,000 Pyongtaek 220,000 Daegu 40 suppliers Ulsan 1,500,000

Inchon 500,000 Hwasung 600,000 Asan 300,000 Seosan 150,000 Gunsan 300,000 Changwon 240,000 Changwon Engines

Busan 250,000

Jeonju 125,000

Gwangju 400,000

Automobile Industry Status

Global Presence & Changes

Global Presence
Acquired controlling share (37.3%) of Kia Motors (Nov. 1998)

Strategic Alliance
51% Merged w/ Daewoo Motor

WHO??

Share acquisition 80% Merged w/ Samsung Motors

Automobile Industry Prospects

Shares of the Global Players
Restructuring in the Global Auto Industry
-Toyota now No.1 in the world - Old days for BIG 3 - GM Bankrupt/Chrysler merged to FIAT - Rise of Korean cars in the U.S. Market
2000 20.3% 14.1%
Source: FOURIN

2007
13.1% 10.7%

2000 4.3% 10.4%

2007
5.8% 13.3%

Change in Sales in the U.S. Market in 2007 (%)
Source: KARI Note: Y-o-Y % Change Hyundai Nissan Honda Toyota
-3.1 -12.2 -6.0 -10 -5 0 2.8 3.1 3.0 4.8

DaimlerChrysler Ford GM
5

Automobile Industry Prospects

New Waves in the Auto Industry Paradigm Change
Global warming
Environment

New energy development

More Competition for highly efficient & environmentally More Cooperation with competitive parts supplier

Safety restrictions
Regulation

friendly car
§New energy car §Hybrid §Fuel cell car

CAFE(Fuel Efficiency) Emission control

Application of
Customer needs for convenience More electronic devices

Intelligent Systems Technology

New Trend

Telematics Multimedia Internet

Automobile Industry Prospects

SWOT Analysis of Korean Auto Industry

Ø Price Competitiveness: - Highly-skilled workers, - low-cost parts & materials Ø Diversified export market Ø Aggressive Marketing

Ø Brand Awareness Ø Labor union issues Ø Immature Parts & raw material industry

Strengths Opportunities
Ø Successful launches on-site production Ø Geographical proximity to China’s markets Ø Potential market of ASEAN

Weaknesses Threats
Ø Saturated domestic market ØHigh dependency on overseas market Ø Technology gap to advanced countries

Automobile Industry Prospects

Major Factors Affecting Market

Outlook for 2009

Positive

Negative

Domestic

- Newly released models
- Potential replacement demand

•Economic depression •Strong competition by makers (Price cut, Low interest rate Financing)

Export

- Demand in emerging market - Improved quality & performance

•Weakened price competitiveness ( weak Korean currency ) • World Financial crisis

Parts Industry

General Overviews
Decrease in OEM Share & Increase in Export in Total Sales
Number of 1st Tier Suppliers by Auto Maker
Year Hyundai 2006 2008
366 355 Kia 372 359
actual suppliers/

GMDAT 304 307

Ssangyong 220 222

Renault- Daewoo Samsung Bus 133 141 186 187

TataDaewoo 196 204

Total 1,777 (902)* 1,775 (889)*

•Number of

Number of FDI companies : 170 among 889

Total Sales Volume in Korean Auto Parts Industry
Year 2006 2007 2008*
Sales Volume OEM 37,559 (78%) 38,641(77%) 28,129(77%) A/Market 2,441 (5%) 2,319(5%) 1,688(5%) *source : KAICA Exports 8,002 (17%) 9,231(18%) 8,036(18%)

(Unit: US$ mil.)

Total US$ 48,002 US$ 50,191 US$ 37,852*

* Note : 37.5% $ appreciation

Parts Industry

Business Climate of Korean Auto Parts Industry
Threats of Entry
§ Large-scale Strong foreign companies § Rise of China with low price

Supplier’s Bargaining Power
§ Raw material price up §Bigger suppliers bigger power

Rivalries
§ New entrance of potential suppliers § Different sizes

Buyer’s Bargaining Power
§ Increased cooperation § Continuous requests for cost reduction & quality § Big volume order

Threats by Substitutes
§ New types of vehicles (HEV) § Technology integration

Parts Industry

Global Auto Parts Manufacturers in Korea

41 of the world’s 50 largest auto parts suppliers have a presence in Korea in 2008

Parts Industry Prospects

Growth Factors of Korean Auto Parts Industry

Positive Factors Negative Factors

OEM

•Big Volume of domestic production • Orders from major global makers •Quality & price competitiveness •Encroachment by Chinese suppliers •Weak Technology •Sourcing from low cost

After Market

• More cars on the road • Demand to authentic parts •Increased durability •Less car accidents •Low price generic parts

Investment opportunities

Competitiveness of the Korean Auto Industry
Korea’s Automotive Industry
• No. 5 in the world in 2008 total production of 3.8 Mil.Units • 5.4% share of the global production
Ranking Country Production World Automobile Production Ranking

1 2 3 4 5 6
Unit: thousand vehicles

Japan China USA Germany Korea Brazil

11,563 9,345 8,696 6,045 3,826 3,220

Investment Opportunities

Automobile Industry in Korea
GDP Portion 2.4% /3.8%
Leading industry with semi conduct Auto/Semi Conduct (2006)

Employment 1.09% /1.07% Export 9.4% /10.25% R&D fostering environment

Strong Government support

Company friendly policy Road Length(Km) 52,264(‘85) 103,019(‘07) Road pavement 49.8% (‘85) 77.6%(‘06) Global R&D

Globalization

Global Parts sourcing Worldwide marketing

Investment opportunities

Vision for Future Vehicle

Vision

Big 4 in the world through developing eco-friendly vehicle
ØBalanced growth both OEM and parts supplier through developing technology of eco-friendly vehicle ØSecure the sustainable growth drive engine for Korea Auto industry to be the global best ØDevelop and commercialization of system technology of parts for hybrid and fuel cell vehicle

Strategy

Ø Global supplier’s base of the parts for hybrid and fuel cell vehicle ØImprovement of living condition through wide spread of eco-friendly vehicle

Investment Opportunities

Steps of Korean Automotive Industry

KD Assembly stage Development stage of Proprietary models

Early stage of mass production/export

Development stage of independent models

Improvement of technology and open market

Investment Opportunities

Policy Direction for Automobile Industry
Automobile Industry Policy Direction

vDevelop innovative auto technologies such as ‘telematics’ and integrated control systems increasing safety and comfort. vSecure source technologies for hybrid and fuel-cell vehicles. vProvide incentives for eco-friendly vehicles.

Parts & material Industry Policy Direction

vDevelop technologies for imported parts and materials. vConstruct business-friendly infrastructure.

Investment opportunities

Government Initiatives for Development
Top 4 in the World by 2015
•Source : Ministry of Commerce, Industry and Energy, ‘2015 Automotive Industry Policy Direction’, ’05.11.15

Vision
Create a ‘Made in Korea Premium’ in the Global Automobile Industry Play a Leading Role in Key Industries in the US $30,000 GDP Era

Target
Automobile production • Domestic • Overseas Global market share World’s top 100 auto parts suppliers Automobile exports Auto parts exports No. of new jobs

2007
• 4,086,308 cars • 1,162,000cars • 5.8% (5th) • 2 • US$ 37billion • US$ 12.4billion • 264,000 (2006)

2015
• 5,200,000 cars • 2,400,000 cars • 8% (4th) • 12 • US$58 billion • US$16 billion • 280,000

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