Parts suppliers make inroads in China

LS Group, the nation’s 13th-largest conglomerate, announced yesterday it signed an MOU with China’s Dongfeng Motor Group to develop parts and systems for environmentally friendly cars, such as electric vehicles and hybrids.

Dongfeng was China’s second-largest automaker last year with a market share of 30.5 percent and production of 3.08 million units. Four affiliates of LS Group will cooperate in areas like powertrains, electronics, and charging and energy storage systems.

“With a strategic alliance with Dongfeng, LS has secured a bridgehead to the world’s largest auto market,” said LS Industrial?Systems CEO and Vice Chairman?Koo Ja-kyun yesterday at the signing ceremony in Anyang, Gyeonggi. “This will be a beginning for LS to step up as a top global manufacturer of auto parts for environmentally friendly cars.”

LS formed a relationship with Dongfeng last year, when its affiliate Daesung Electric supplied parts to the automaker.

LS Industrial Systems will develop power control units, on-board chargers, line-to-DC converters and other parts, while LS Cable will take care of wire harnesses and charging system connectors. LS Mtron will develop ultracapacitors, an energy storage system, and Daesung Electric will continue to supply body control modules and other electronic parts.

SK Innovation also signed?a preliminary deal last month with two state-run partners - Beijing Automotive Industry Corporation and Beijing Electronics Holding - to form a joint electric vehicle (EV) battery venture.

The holding company of SK Group’s energy business subsidiaries said the joint venture is expected to launch next month. Until the production line is up and running, SK Innovation will provide EV battery packs from its plant in Seosan, South Chungcheong.

Industry insiders said tighter environment regulations and increased awareness of pollution in China represents a golden opportunity for Korean auto parts suppliers.

The Chinese government recently toughened passenger car fuel economy standards to 6.9 liters per 100 kilometers (62 miles) by 2015 and 5 liters by 2020.

The China Association of Automobile Manufacturers said 4.42 million vehicles were sold in the first quarter.

Meanwhile, to further help local parts manufacturers do business with Chinese companies, the Korea Trade-Investment Promotion Agency (Kotra) yesterday hosted a meeting in China to connect officials from Geely Automobile Holdings, China’s largest automobile company, and 11 Korean auto parts companies.

“We are confident the companies will be successful in exploring China’s domestic market as they have world class product quality and price competitiveness,” said Kim Sang-chul, head of?Kotra’s Shanghai?office.

By Joo Kyung-don [kjoo@joongang.co.kr]