The Korea Herald


Korean auto firms fall short in profitability

By 안성미

Published : Aug. 17, 2016 - 14:50

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[THE INVESTOR] The operating margin of South Korea’s automotive industry stood at a meager 5 percent last year, an industry study showed Aug. 17.

The study by the Korea 20000 Corporate Research Institute analyzed 1,079 companies, including auto and auto parts manufacturers and vendors, both public and private.

Combined sales of 1,079 firms posted 234.8 trillion won (US$212.2 billion) in 2015. Their operating profit came to 12.18 trillion won, accounting for 5.2 percent of their sales. 

South Korean cars are waiting to be shipped overseas. The Investor South Korean cars are waiting to be shipped overseas. The Investor

Only 94 auto companies, or 8.7 percent of the total, recorded an operating margin of over 10 percent in 2015.

The low margin was mainly due to high cost, industry experts say.

“Auto industry’s cost of materials and labor is ever-increasing, which yields low profit,” said Oh Il-sun, head of the institute. “The situation is a lot worse for small and mid-sized companies, which are mostly subcontractors (of conglomerates), as most of the profit is generated by only a few large companies.”

Only three companies’ operating profit exceeded 1 trillion won last year, which accounted for 69.6 percent of industrywide profit. They are Hyundai Motor with 4.26 trillion won, Kia Motors with 2.29 trillion won and their auto parts affiliate Hyundai Mobis with 1.92 trillion won.

The top 10 companies -- including Hyundai Wia, Renault Samsung and BMW Korea -- reported a combined operating profit of 9.97 trillion won, making up a whopping 81.9 percent of the industry.

Meanwhile, the auto firms’ debt tallied 94 trillion won, approximately 71.9 percent of total assets.

By Ahn Sung-mi (