[Consumption value-10th anniversary/In-Depth Report] 3 experts in public and private partnerships explore strategies to improve the vehicle sector's competitiveness ①

[Consumerwide - HueSoung Jun Reporter / Yohan Bok Reporter]  The paradigm shift in the vehicle industry, which involves environmental and technological change, has resulted in the growth of Chinese manufacturers centred around Tesla and BYD, along with the expansion of the Chinese market globally based on their battery, AI, and S/W technologies. Meanwhile, major countries, such as the US, are focusing on protectionist policies to secure future industries in the global and national markets. Having all this background, it's been more emphasised the importance of coordinated work between government, academia, and the private sector. 

I had the opportunity to hear about the opinions of experts in public and private partnerships regarding the method to strengthen future competitiveness in the vehicle industry during a conference held to celebrate 21st Automobile Day on May 9 at 9:30 a.m. at the JW Marriott Hotel Gangnam Grand Ballroom.

First of all, Kim Hyosun, the civil servant of the Ministry of Trade, Industry, and Energy, spoke about the future direction of the vehicle industry in terms of policy.

The vehicle industry, which is carried by over 10,000 businesses in Korea, is contributing to national economies based on trade, employment, and manufacturing records from last year. The overall vehicle trade exports total over 90 billion dollars (approximately 122 trillion won), which ranks the top amongst entire export sectors in Korea, along with 330,000 jobs and production worth 214 trillion won. Besides, the vehicle sector broke the record by 71.1 billion dollars in surplus.

A large change is expected in 10 years in the vehicle industry due to the technology paradigm shift, which involves electronization, the development of SDV (software-defined vehicles), and digitalization. Corporations between the government and private sector are vital while the nature of industry is changing. In response to this, the government is planning to weigh the supply of funds, support the discovery of partners, secure essential technologies, train experts, and ease regulations in the mobility sector.

Kim Hyosun, the civil servant of the Ministry of Trade, Industry, and Energy, said, 

"Currently, the vehicle industry is leading innovations in a variety of upstream and downstream industries, including batteries and steel machine areas. Thus, I perceive that it will continually carry out its role as the last demand for every industry and core industry in the future. Besides, I suspect that our vehicle industry is constantly responding to the large change that is taking place today for the following reasons: The Korean government is trying to enhance environmental regulation according to global carbon neutralisation demand and the increasing production of EVs. At the same time, the self-driving and connectivity sectors have been stressed as the whole vehicle industry is focusing on the development of vehicles based on software rather than mechanics. While a number of nations are excluding China from the supply chain and trying to strengthen supply chains in their alliance, which are reflected in a variety of policies, such as the IRA (Inflation Reduction Act of the US), French government subsidy schemes, and policies that aim for production in their own countries, the vehicle industry has suffered because of the nature of the industry, which supplies parts from many different nations, such as semiconductors, SCR (selective catalytic reduction), and wiring harnesses, especially during COVID 19. However, maintaining competitiveness relies on the maturity with which we respond to change. For this reason, we are trying to focus on policies to support businesses to overcome any difficulties they might face in the era of change, which involves electronization, self-driving, and AI technology."

During the mobility invention period, demands for the parts relevant to electrification and self-driving vehicles increased, whereas demands for the parts for fossil fuel-based vehicles decreased. In 2022, 83% of auto parts businesses in Korea had sales profits under 10 billion won annually. And 97% of these businesses maintain less than 100 workers, along with an approximate 2% sales profit. Only 20% of auto parts manufacturers are focusing on the future car industry; furthermore, they are lacking the skills to secure hyper-competitive technologies for the future. As a result, only one Korean auto parts business ranks among the top 10 global auto parts businesses. (Hyundai Mobis ranks 6th.) In 2021, the vehicle industry suffered from a shortage of semiconductor supply, which is one of the core parts of vehicles. Besides, we are not able to make all parts in Korea, but only 40% for self-driving vehicles and 82% for EVs. Nurturing and securing a total of 35,000 experts by 2030 means that industry will be able to carry out manufacturing and development based on the new field of technology. (15,000 people for manufacturing technology, 10,000 people for development, and 3,000 for designing) Function training in the areas of machanics, assembling, and software field training is also needed.

Aiming to assist Korean businesses to turn to new technology in a timely manner, the Korean government is planning on three assignments.

The assignment involves the supply of funds, the discovery of partners (work placement), training experts, the development of technology, and adjustments in regulations to speed the transition to mobility. We see that the government should take a role in supporting the market to create jobs through the discovery of partners and guiding healthy demand and supply. The Korean government has plans for the following tasks: expansion of subsidies for vehicle acquisition tax and luxury tax regarding the purchase of EVs and HVs and offering EV subsidies up to 1.7 trillion won in 2024; distribution of 2 million EVs and HVs by the first half of 2027; securing 1.23 million EV chargers by 2030; and securing 95 trillion won of business investment contracts by tax deduction benefit, such as tax deduction for facility investment at a maximum of 25% for businesses relevant to future vehicle technology as part of the national strategic technology scheme. In early January, the government set a roadmap for regulation change for the environmental mobility project.

Kim, the civil servant of the Ministry of Trade, Industry, and Energy, said, "The government has planned to invest over 15.1 trillion won to support businesses for change this year. Concerning the high interest rate and the latest trend, which is that EV consumption is decreasing globally, the government is setting the policy fund, which is 9.7 trillion won this year, and the low-interest loan, which counts 0.2 trillion won. Vehicle manufacturing businesses are also handling liquid funds and sharing R&D funds with auto parts businesses. We are looking forward to securing investment in environmental vehicles along with the expansion of EV manufacturing capacity by fivefold in running various programmes, such as the expansion of subsidies for vehicle acquisition tax and luxury tax, including EV and hv manufacturing factories for national strategic technology, which brings tax deduction effect, and the adjustment of mobility-related regulations.

First of all, we begin by finding the right businesses for this project in corporations with vehicle manufacturing businesses and financial institutes. We also facilitate regular support centres, hoping to support vehicles throughout the life span of a vehicle. We focus on human resources while securing technology experts in global competition. And the government is investing 2 trillion won for five years in the self-driving and environmental R&D sectors, particularly in human resource areas, for the next five years. By adjusting and executing the auto parts industry regulations by July, we are trying to support those businesses financially. We are also training 10,000 experts in the softwear sector while investing an overall 40 billlion won in R&D. Based on the regulation innovation roadmap (Jan. 2024), which includes eliminating any element that might stop investment while creating a safe ecology along with a consumer-friendly basement, we are trying to improve by over 77% during the year. Besides, even if there is no area increase, businesses can still receive regional investment subsidies for any previous investment related to future vehicle technology, starting in July. Nurturing the auto parts cluster and expanding the tax deduction for temporary investment were also announced, yet the regulation has not been changed accordingly. Thus, we plan to compensate those investments made this year after the amendment of regulations. Many customers seem hesitant to purchase EVs concerning vehicle fire, and we feel uneasy about recommending them concerning the current status of EV technology, which cannot stop the fire once it begins. Nevertheless, we are trying to grow in capacity in case of any fire cases while also preventing the fire in the first place by backing fire prevention guidelines and executing the battery examination regularly. It takes a long time to repair the EVs and HVs, and the cost of repairs exceeds that of ordinary vehicles based on fossil fuels. For this reason, we will try to recruit more experts for EV repairs while also improving infrastructure, including the chargers. We plan to install more rapid chargers in highway reststops by enhancing regulation while also speeding up charger circulation by regulating the industry to charge extra for vehicles that stay extra hours at the station. Besides, we will try to make the charging environment more convenient by limiting vehicles that are staying at the station without charging or vehicles (phev) that are staying even after completing the charge (limiting charging hour)."

The vehicle industry is facing slow demand for EVs, with growth speeds of 115.3% in 2021 and 27.8% in 2023. Besides, the global carbon regulations require standards based on the LCA system, including those of European nations such as France, in relation to their national evaluations of EV subsidies. Vehicle manufacturers are also estimating auto parts products based on carbon reduction aspects. Chinese EV manufacturers speeding up in entering the global market, policy changes in EVs and HVs according to the US election, EU investigation on Chinese EVs regarding subsidy benefits of the Chinese government, and decoupling pressure in the vehicle supply chain (diversifying supply chains away from China without cutting economic ties altogether) are influencing the situation.

Kim, the civil servant, said, "In the EV era, it seems not enough to just rely on the sales of HVs; EV sales are necessary. We've got to improve the purchasing environment accordingly. I hope that we can overcome the future difficulties we face in corporations between the government and business sectors."

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