[NEWS IN FOCUS] Automakers sink as rust belt hit

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[NEWS IN FOCUS] Automakers sink as rust belt hit

In the auto business, the situation is going from bad to worse, just as the companies thought it would be a time of recovery for them.

Because of the coronavirus outbreak, test drives are being canceled and product introductions are being scrapped. Consumers are cutting back, both because of general concern caused by the epidemic and the hesitation to step into a car that might have been driven by others recently.

Most of all, parts bottlenecks are developing as factories in China shut and stay shut and as lines grind to a halt domestically with every scare.

The outlook is for at least a 20 percent drop in car sales in Korea in 2020, with one local academic specializing in the industry saying Tuesday that the auto business in Korea is in a state of war.

Geography is working against the automakers. It turns out that Korea’s rust belt is also the country’s corona-belt.

More than 50 suppliers for Hyundai Motor and Kia Motors are located in Daegu and North Gyeongsang, which are now at the center of Korea’s coronavirus storm. Home to 20.3 percent of all auto parts manufacturers in Korea, the two areas are vital to the business.

“Many auto parts suppliers are in Daegu and North Gyeongsang, and those two regions are often called the ‘industrial belt’ for the auto industry,” said Kim Pil-soo, an automobile engineering professor at Daelim University. “If they come to a stop from employees getting infected by the virus, all automobile manufacturers in Korea are going to have to adjust their operations.”

This has already happened, in a most dramatic and macabre way. Hyundai Motor said Tuesday that it was the halting the operation for one day of an assembly line making Porter trucks at its No. 4 factory in Ulsan.

The automaker closed the factory after Seojin Industrial, a maker of chassis, auto frames, truck beds and wheels, had to close a day earlier after one of its employees was found dead at his home Friday and tested positive for the coronavirus.

Even if cars can be made, it may not be so easy to sell them in the current environment. Marketing is following manufacturing as a victim of the virus.

A test drive by Renault Samsung Motors to be held on March 4 for the new XM3 was canceled - though the vehicle will still be available from March 9.

The Korean unit of the Renault Group needs a boost.

In 2019, Renault Samsung Motors sold 90,591 vehicles, down 34 percent from 137,208 units in 2018, while a production contract with Nissan for Rogue SUVs came to an end late last year.

The company, which has been dependent on the QM6 SUV, was looking for a boost from the XM3, which has already attracted 2,500 orders.

While nothing has yet been decided, Hyundai Motor said Tuesday that it is discussing whether to delay the introduction of the new Sorento SUV, which was to be rolled out next month.

A company spokesperson said the automaker is keen to follow government guidelines on mass events and is debating whether to hold a media test drive for the new mid-size SUV.

The company is also reviewing its original plan to introduce the new Genesis G80 and Avante mid-size sedan in the first half of the year.

BMW said Tuesday that it is canceling the launch event in Korea for the upgraded 1 Series and 2 Series.

The Busan International Motor Show slated for late May was already under pressure even before the virus started taking hold as only three foreign brands - BMW, Mini and Cadillac - registered to exhibit at the event, while Hyundai Motor, Kia Motors, Renault Samsung Motors and GM Korea are registered as local participants.

This year’s iteration could mark the end of the Busan motor show, as the number of visitors to the biennial exhibition was already in decline, falling from more than 1.1 million in 2012 to 620,000 by 2018.

The number of visitors this year is likely to be lower than in 2018.

The sector landscape is equally challenging internationally, and the difficulties created by the cancellation of international events could disrupt sales plans globally.

The China Council for the Promotion of International Trade announced last week that this year’s Beijing International Automotive Exhibition is being postponed from its original start date of April 21 until further notice due to the virus outbreak.

Europe’s first major annual auto show of the year, the Geneva International Motor Show, set to begin March 5, could also be delayed or canceled as the virus outbreak is starting to take hold on the continent.

Hyundai Motor was planning to showcase the new Sorento and the i20 hatchback at the European auto exhibition.

Kim forecasts 2020 car sales in Korea to fall by at least 400,000 units. According to the Ministry of Land, Infrastructure and Transport, a total of 1.81 million vehicles were newly registered last year, down from 1.84 million in 2018.

“Most of, if not all, auto industry events are canceled at this point, and it really is a hard time for everyone,” said professor Kim.

“Consumers are less inclined to come out of their houses to look for new cars, and they are generally in fear of getting in contact with other people. Nobody is going to test drive a car that already was in contact with dozens of others.”

BY KO JUN-TAE [ko.juntae@joongang.co.kr]

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