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Beleaguered automakers request liquidity, tax support

Trade, Industry and Energy Minister Sung Yun-mo (left) speaks during a meeting with the country’s five major finished carmakers and auto parts makers in Seoul on Tuesday. (Yonhap)
Trade, Industry and Energy Minister Sung Yun-mo (left) speaks during a meeting with the country’s five major finished carmakers and auto parts makers in Seoul on Tuesday. (Yonhap)

The five major Korean carmakers and auto parts makers on Tuesday asked the government for liquidity support for the automobile industry, which has been hit hard by low sales amid the COVID-19 pandemic, and measures to boost domestic demand.

According to the Ministry of Trade, Industry and Energy, Minister Sung Yun-mo met with representatives of the country’s automakers, including Hyundai Motor Group President Gong Young-woon, Kia Motors President Song Ho-sung, SsangYong Motors President Ye Byung-tae, GM Korea CEO Kaher Kazem and Renault Samsung CEO Dominique Signora, to hear about difficulties they are facing due to COVID-19.

The chiefs of eight local auto parts makers also took part in the meeting, the ministry said. 

The heads of the auto companies said the industry needed liquidity support so the companies could pay fixed costs such as salaries, amid significantly diminished sales as a result of COVID-19.

They also asked the government to exempt them temporarily from the acquisition tax, on top of the earlier exemption from the consumption tax.

They said the government should extend the payment deadlines by as much as nine months for consumption tax, value-added tax and tariffs for automobiles. Automakers also asked the government to apply 2019 standards for greenhouse gas emissions for passenger vehicles until year-end. The limit for 2019 was 110 grams per kilometer.

Minister Sung said the government would closely monitor the situation in the automotive sector and would review support measures with related ministries as necessary.

As of last week, 14 global automakers, including Volkswagen and BMW, had shut down 242 of 313 automotive manufacturing factories to prevent the spread of COVID-19. Companies such as GM, Ford and Toyota have activated emergency business management systems to secure capital. 

Korean automakers have been hit hard by the outbreak, as dealerships in European and North American markets have suspended operations due to COVID-19. These two markets account for 63.1 percent of overseas sales of the five major carmakers here. 

According to the government, the country’s automotive exports fell by 45.8 percent from April 1 to April 17, compared to the same period in the previous year. The production volume diminished 19.2 percent during this time. 

Due to diminished demand, carmakers have cut production in April.
Hyundai Motor Group’s Ulsan plant closed its production line No. 2 for four days, while SsangYong Motors closed its Pyeongtaek, Gyeonggi Province, factory for eight days. Six of Hyundai Motor Group’s 18 overseas factories in nine countries are currently closed, according to the company.

A day earlier, Hyundai Motor Group said some 1,200 executive-level employees from 51 affiliates, including the group’s Executive Vice Chairman Chung Euisun, had decided to return 20 percent of their monthly salary starting this month. The company said the executives had reached a consensus that they needed to cut costs amid an unfavorable environment for domestic and overseas business. 

By Kim Da-sol (ddd@heraldcorp.com)
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