[위기의 한국차]① After Hyundai Motor and Kia monopolized domestic demand, the’Sprout of Innovation’ was cut off.

Input 2021.01.29 06:00

IMF economic crisis right Allows Hyundai Motors to take over Kia Motors despite concerns about “monopoly damage”
70~80% of domestic market share… Transfer of expenses to consumers and partners for 20 years
Remaining domestic companies worsen financial situation → shrink investment → repeat business crisis

Amid the intensification of’carmageddon’, which began with the spread of eco-friendly cars, autonomous driving, and mobility services, the Korean automobile industry is facing a major restructuring. The automobile industry has a huge impact on the economy as a whole, with large front and rear effects such as maintenance, sales, and materials as well as manufacturing. In order for the automobile industry to become the strong backbone of the domestic economy, we will look at how the structure of the domestic automobile industry should be improved and in what direction the restructuring of companies should take place.[편집자주]

In the face of the upheaval of the automobile industry, global companies are fighting to take the lead in the future mobility market, but the Korean automobile industry is shaken by a total crisis. Hyundai Motor (005380)· Three automakers, including GM Korea, Renault Samsung, and Ssangyong Motors, which have supported the Korean car industry with Kia, are in a position to worry about survival right away, not preparing for the future.

Renault Samsung and Ssangyong Motor (003620)Suffered a serious management crisis and was pushed to the edge of the cliff, and GM Korea was struggling with a deficit for seven consecutive years until last year. The situation is not as good as Hyundai and Kia. It was good in the domestic market thanks to the government’s tax support, but it is giving away a significant portion of the domestic market share to imported car makers, and its position is getting narrower as the sales performance in the overseas market deteriorates.

This situation is intact in terms of Korean automobile production performance. Hyundai Motor Company and Kia and three domestic automakers produced 4.55 million cars by 2015, six years ago, placing Korea on the ranks of the world’s top five car producers. However, the production of the five automakers went downhill, and in 2019, the production of Korean cars fell below 4 million units in 10 years, and last year was only 3.5 million units, the lowest in 16 years since 2004 (347 million units). The global production ranking also ranked 7th after China, the United States, Japan, Germany, India and Mexico.

Last year, the unexpected corona crisis caused the auto industry to contract, and even before that, international political issues such as the US-China trade war and China’s THAAD retaliation hit the domestic car industry, but the decisive cause of the crisis was the continued high cost structure and innovation. It is a loss of competitiveness due to failure.

Many experts say that one of the reasons why the Korean tea industry continued to grow externally but was not competitive Kia Motors (000270)It is pointing to the formation of a serious domestic monopoly structure by taking over. As Hyundai Motor Company and Kia became monopolistic companies with 70-80% of the Korean car market, innovation did not sprout in the car industry. Although there is no way to reverse the decision 14 years ago, experts point out that reflecting on the wrong judgment at the time could be a good wrong answer note now that the auto industry restructuring clock accelerates.

With the acquisition of Kia Motors, Hyundai Motor Company became a monopoly company that occupies 70-80% of the domestic automobile market. In 1997, when the currency crisis was in full swing, the Fair Trade Commission allowed Hyundai to take over Kia Motors despite monopoly concerns. At the time, there were concerns within and outside the government and business circles that a clear monopoly market would be formed if Hyundai Motors acquired Kia Motors, but the Fair Trade Commission approved it, seeing Kia Motors as a non-renewable company, and combining it with Hyundai Motors to improve efficiency. As a result, the triangular structure of domestic automobiles composed of Hyundai, Kia, and Daewoo Motors at that time collapsed.

At the time, however, it was difficult to accurately measure whether the profits from the merger were greater than the monopoly damage. In addition, Daewoo Motors, Samsung Motors, and Ford also participated in the takeover of Kia Motors, and Hyundai Motor was not the only target to take over. However, the government pushed for the acquisition of Hyundai Motor Company and Kia Motors to quickly get out of the serious economic crisis.

The results of Hyundai Motor’s acquisition of Kia Motors did not differ from expectations. According to the Korea Automobile Industry Association, Hyundai Motor Company and Kia sold a total of 1.34 million units in the domestic market last year, accounting for 83% of the market share. Even including Imports, Hyundai and Kia’s domestic market share is 71%. The union of Hyundai Motors and Kia receives a high level of wage hike by repeating strikes almost every year, and the management continuously raises the sales price of automobiles and cuts the delivery unit price by 5-10% annually to suppliers that supply parts, which is a cost to consumers and suppliers. Is imputed. In an environment in which a normal automobile industry ecosystem cannot be established, the typical dominion of monopoly companies has continued for more than 20 years.

The overwhelming market share is eroding the competitiveness of the front and rear industries, such as production and sales and maintenance. “The quality of customer service for domestic car makers such as sales and maintenance is low, because Hyundai and Kia can sell many cars in Korea without improving the service,” said an official from a car company. “There is no incentive for other companies to raise the level of service as the occupied Hyundai Motors and Kia do not improve service quality.”

The harm of the monopoly market that does not require competition is evident in how much domestic automakers are investing in research and development (R&D). According to the Korea Automobile Industry Association, as of 2017, Hyundai Motor and Kia’s R&D investment amounted to 4 trillion won, which is only 25% of Volkswagen in Germany and 40% of Toyota in Japan. The ratio of R&D to sales is only 2.8%, which is significantly lower than that of Volkswagen (5.7%) and Toyota (3.6%).

As the market structure was distorted by Hyundai Motors and Kia, which monopolized demand, domestic automakers’ innovation capabilities gradually decreased. While Hyundai Motor Company and Kia eroded domestic demand, the three companies that lost their brand competitiveness in the domestic market narrowed, and they are experiencing periodic recurrence of deteriorating financial conditions, shrinking investment, and business crisis.

Research Fellow Lee Hang-gu said, “With the formation of an excessive monopoly structure of Hyundai Motors and Kia, the remaining domestic car makers lacked the capacity to invest in R&D and turned into a simple consignment production base.” “The monopoly on demand reduces the competitiveness of the Korean tea industry. It is a chronic problem, but there is no way to solve it.”

In Japan, Germany, and the United States, where the automobile industry is well established, there is no case where a single company monopolizes the domestic market. Toyota’s domestic market share of Japan is around 40%, while Volkswagen’s market share in Europe is around 20%. In the US domestic market, General Motors (GM) and Ford also have low market shares.

Looking at other key industries in Korea, there are few markets with extreme monopoly in the automobile industry. In the oil refining and telecommunications industries, which are key industries and consumer goods like automobiles, there is a market in which at least 3-4 companies compete.

The refinery industry SK innovation (096770)GS CaltexS-Oil(010950)· Four refineries, including Hyundai Oilbank, share the market. Although there are differences in market share, all of these companies make significant investments to increase productivity and improve gasoline quality to gain more consumer choice.

The same goes for the telecommunications industry. SK Telecom (017670)·KT(030200)·LG U+ (032640)As a result of competing by expanding investment, the quality of currency and data is continuously improving. Competition between oligopolistic companies also acts as a barrier to prevent one company from raising the prices of products and services excessively.

The problem is that we are concerned about a bigger crisis going forward. The global automobile industry, which has been centered on internal combustion locomotives, is being reorganized to focus on future vehicles and mobility services that require new technologies such as electric vehicles and autonomous driving. To prepare for a new era, domestic automakers must compete in various fields to build their technological prowess and head for the global stage, but domestic automakers, driven by the crisis of survival, are not taking a step into the future mobility market. If the current situation is maintained, Hyundai Motor and Kia’s monopoly and the resulting harm are expected to intensify in the future domestic automobile market.

Academic officials who requested anonymity said, “To reduce the negative externalities caused by the monopoly of Hyundai Motors and Kia, there are voices that the government should actively support the rehabilitation of domestic automakers such as GM Korea, Renault Samsung and Ssangyong Motors. Looking at the government’s movement over the years, I don’t know if there is a will to properly save the remaining three companies.” “I am concerned that the government is trying to restore competitiveness in the automobile industry by judging that there is no problem if only Hyundai Motor and Kia survive. “It becomes.”