Hyundai to spend 5.2 trillion won to electrify auto industry's supply chain

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Hyundai to spend 5.2 trillion won to electrify auto industry's supply chain

Published: 19 Oct. 2022, 18:12

Prime Minister Han Duck-soo, center left, and Hyundai Motor Group Executive Chair Euisun Chung, right, stand for a photo during a signing ceremony held in Hwaseong, Gyeonggi, Wednesday. [HYUNDAI MOTOR GROUP]

Hyundai Motor Group will spend 5.2 trillion won ($3.6 billion) to electrify the local auto industry's supply chain.

The goal is to support auto part suppliers struggling amid surging production costs and the global shift toward electric vehicles (EVs), by covering their losses and helping the electrification process in collaboration with the government, said the carmaker.

On Wednesday, Hyundai Motor Group — which includes Hyundai Motor, Kia and Hyundai Mobis — signed an agreement with the government and research institutions at Hyundai Motor and Kia’s research center in Hwaseong, Gyeonggi.

Government bodies include the Ministry of Industry, Trade and Energy, Ministry of SMEs and Startups and Fair Trade Commission. The Korea Automotive Technology Institute, a research institute, and the Foundation of Korea Automotive Parts Industry Promotion, a non-profit organization, also took part.

The event was attended by Prime Minister Han Duck-soo and Hyundai Motor Group Executive Chair Euisun Chung.

“The government will actively push to expand the local production base of core auto parts and technology localization, while also encouraging the auto part industry's business diversification through support in technology development and finances,” said Han during his celebratory remarks Wednesday.

“While the local auto industry is facing increasing difficulties due to factors such as global supply crisis, now is also the time to respond to the internal combustion engine electrification trend,” said Chung.

Hyundai said that it will spend 3.4 trillion won in extending the indexation system, which reflects inflation in the price.

It will also raise a 100-billion-won fund to support sub-suppliers hit by rising interest rates and weakening local currency. All of the money will be executed within the first half of next year, said Hyundai Motor Group.

Another 1.6 trillion won was allocated for financial support, including low-interest loans for internal combustion vehicle part suppliers diversifying their portfolios into EV parts, and interest subsidiaries for sub-suppliers.

Hyundai Motor Group and the Ministry of SMEs and Startups will each provide 25 billion won to form a research and development (R&D) fund. Hyundai hopes to help suppliers make their factories more energy-efficient as well.

The industry ministry will support auto suppliers’ R&D projects for future mobility technologies such as autonomous driving, and extend financial support. The Fair Trade Commission will provide institutional support regarding the price indexation system.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]