Auto parts firms head to Nagoya

Britain’s vote to leave the European Union has pushed up the value of the yen, and Korea’s automakers and auto parts makers are eager to take advantage of the situation.

In an attempt to penetrate the auto market in Japan, the Korea Trade-Investment Promotion Agency (Kotra) is establishing a booth for Korean auto parts makers at the Automotive Engineering Exposition held in Nagoya, Japan, from Wednesday to Friday.

It is the first time Korean companies are participating in the biggest automotive exhibition in Japan.

Seven Korean auto parts makers, including Yongsan and Myunghwa, and more than 300 parts makers from Japan are participating along with eight Japanese car manufacturers.

“With the recent strengthening of the yen and problems supplying core auto parts [due to earthquakes] in the country, Japanese automakers are likely to expand imports for their parts supply,” said Kim Sam-sik, head of the Kotra’s Nagoya trade center. “The business environment for Korean carmakers and parts suppliers is improving [in Japan], and it will get even better if we can respond appropriately to the recent needs and development trends in the Japanese auto industry.”

On Friday, the yen reached a 32-month high of 99.02 per dollar. The Japanese yen, the third-most traded currency in the world after the dollar and euro, is often bought in times of turmoil as investors look for safe investments.

“There was a rally of Korean automotive stocks in 2011, when the yen’s value was strong due to the credit rating downgrade of the United States and earthquakes in Japan,” said Kwak Hyun-soo, a senior researcher at Shinhan Investment. “Now we’re facing a similar situation.”

However, there are contrasting views on the strong yen and its effects on the nation’s automotive industry.

“People seem to think a stronger yen will automatically benefit Korean automakers, but there are various factors affecting the sales and profit of a company,” said Kim Joon-sung, a senior analyst at Meritz Securities. “In the past, there were other factors coupled with a stronger yen that gave a competitive edge to Korean automotive shares, such as the nuclear accident in Japan and a recall of [Toyota’s luxe brand] Lexus cars in the U.S.”

He said the exchange rate alone wouldn’t be enough to pull up sales of Korean automakers.

“Exchange rate benefits to Korean automakers won’t last very long, as the Japanese government will work toward bringing the rate back to where it was,” said Kim Jung-sik, an economics professor at Yonsei University. “The bigger issue facing automakers will be the declining economies of European countries impacted by Brexit.”

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]