With the novel coronavirus outbreak showing no signs of slowing down, many carmakers have suspended production in China in line with government guidelines. These include Tesla, Ford, PSA, Nissan and Honda, among others. However, now comes the report of Hyundai suspending production not in China, but in its home base of South Korea, due to parts supply disruption resulting from the coronavirus outbreak.
Most of Hyundai’s Korean factories will be fully idled from February 7, while some production lines are expected to restart on February 11 or 12, a union official said. Schedules for suspension will vary by production line, a Hyundai spokeswoman said, reported by Reuters.
Prior to this, Hyundai had already stopped production of the flagship Palisade SUV over the weekend due to a shortage of components from China. Wiring harnesses is the part in shortage, auto industry officials said. Hyundai Kia, the world’s No.5 automaker, does not keep large stocks of the part, which is mostly made in China, said Lee Hang-koo, senior researcher at Korea Institute for Industrial Economics & Trade.
“Hyundai and Kia may be more affected as they tend to import more parts from China than other global automakers,” Lee said, explaining that Hyundai’s reliance on China has grown sharply as it built a huge production capacity in the country several years ago when its business was booming there. “South Korean parts makers followed and built their own facilities along with Hyundai,” he added.
According to trade data, South Korea imported US$1.56 billion (RM6.41 billion) worth of auto parts from China in 2019, versus US$1.47 billion (RM6.04 billion) in 2018. Hyundai has seven factories in its homeland, which together account for about 40% of the company’s global output.
This disruption to supply and production comes at a bad time for Hyundai, as it breaks momentum for the Korean carmaker, which recently turned in its best quarterly profit in over two years. Hyundai said it was on track for higher profit margins, boosted by more sales of SUVs such as the Palisade and Kona.
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The reason for not keeping many part in stock is following the Toyota Production System of Just In Time method and Kanban, so that the system runs efficiently with a very low risks and proven as well.
What’s this? Korea depending on China for parts? Isn’t Korean car made in Korea, so why depend on China for parts? Even some so-called China local car here did not face any disruption because of the virus and yet so-called Korean made cars are critically dependant on China. What a laugh!