The coronavirus is endangering South Korea’s automotive industry—its biggest and most visible export after semiconductors.
The reason is simple. Hyundai Motor and its sister company Kia Motors, as well as three smaller competitors, are not getting wiring that’s made in China by the Korean subsidiary of Leoni, a German car-parts maker. Leoni, like many other companies, has shut down operations in China at least until next week.
The first Hyundai vehicle to suffer was the top-of-the-line Genesis, a luxury sedan that’s manufactured at the company’s historic plant in Ulsan, on the southeastern coast of South Korea, about 190 miles southeast of Seoul.
Hyundai said its plants in Ulsan and two other cities would be slowing down and possibly halting operations until early next week or unless wiring production resumed in China or domestic Korean companies could begin to fill the need. The company asked workers not to report for normal overtime shifts producing its Palisade sports utility vehicle.
There were also concerns that other components might soon be in short supply. Bosch, the German manufacturer, has had to close its two plants in Wuhan until next week. Volkmar Denner, Bosch’s CEO, told reporters in Stuttgart there had been “no disruptions” so far. But “if this situation continues, supply chains will be disrupted,” he added.
Similarly, Kia, which manufactures a number of vehicles on similar platforms as Hyundai vehicles, has had to cut down production at its plants in Korea while suspending work in China.
Together, Hyundai and Kia theoretically produce more than 9 million vehicles a year at plants in Korea and abroad—5.5 million produced by Hyundai and 3.8 million by Kia, according to Yonhap. Their goal this year has been 7.5 million, up from 7.2 million last year, but the coronavirus is already cutting into production and sales in China and may lower expectations elsewhere.
Hyundai Motor, South Korea’s second-largest conglomerate after the Samsung empire, revealed the problems as South Korea counted 16 people so far stricken by the coronavirus, which has claimed more than 400 lives in China. The latest case here was that of a 42-year-old woman who had returned from a trip to Thailand, where 25 people have been diagnosed with the disease, the most outside China.
Besides Hyundai and Kia, Ssangyong Motor, already troubled by severe losses, had to suspend production at its plant at Pyeongtaek, 40 miles southwest of Seoul. GM Korea, Korea’s third-largest motor-vehicle maker, and Renault Samsung Motors both said they were watching to see what to do next, though the latter said it could obtain wiring from its Japanese partners, Nissan and Mitsubishi, reported Yonhap.
The virus is also hitting Korea’s tourism industry. The government stopped granting visa-free entry to foreign travelers wishing to visit the highly popular tourist destination of Jeju, a scenic island province off Korea’s southern coast that’s connected directly by air to major Chinese cities; Chinese nationals accounted for almost all the foreign visitors to the island without visas last year. Lotte Duty Free and Shilla Duty Free, immense attractions for Chinese tourists, have both had to suspend operations on Jeju.
Just as devastating, Samsung Electronics has had to suspend its newly opened flagship store in Shanghai after rival Apple already closed most of its operations in China. Yonhap quoted a Samsung official as saying the store, which opened in October, had closed “for safety.”
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I have reported from Asia since covering the “Year of Living Dangerously” in Indonesia, 1965-66, and the war in Vietnam, Cambodia and Laos in the late 1960s-early 1970s for newspapers and magazines, including the Chicago Tribune and the old Washington (DC) Star. I also wrote two books from that period, “Wider War: the Struggle for Cambodia, Thailand and Laos” and “Tell it to the Dead.” In recent years I’ve reported from Korea for the Christian Science Monitor, International Herald Tribune, Forbes Asia, etc. while writing “Korean Dynasty: Hyundai and Chung Ju-yung,” “Korea Betrayed: Kim Dae-jung and Sunshine” and, in 2013, “Okinawa and Jeju: Bases of Discontent.” I’ve also reported a lot from Japan, the Philippines and Iraq and spent much of 2013 as a Fulbright-Nehru senior research scholar in India.