Renault, Samsung and other Korean automakers may abandon local business

According to the Korea Times, major overseas auto brands in South Korea are struggling amid a continued chip shortage, poor sales, and union-management conflicts. Renault Samsung, GM Korea, and SsangYong Motors are reportedly considering abandoning their Korean operations.

Renault Samsung's sales in April fell 28.6% year-on-year. The company's management and unions have held nine rounds of negotiations and have still failed to narrow the gap between the two sides on 2020 wages.

Renault Samsung CEO Dominique Signora said in a statement, "If we lose this opportunity, our future will become more uncertain. In the past, we may have had another chance, but this time is different." This also implies that if the current bad situation is not resolved, Renault Samsung may withdraw from the Korean market.

A source familiar with the matter said the company's chief executive made the decision on Tuesday to halt operations in South Korea, a decision that prompted Renault Samsung's union to strike in response.

A union representative said, "We will continue to strike until management revokes its decision to close the factory."

Industry observers pointed out that if management does not reverse its decision to temporarily shut down Renault Samsung's only plant, the company's union will strike indefinitely.

GM Korea is also facing pressure from labor unions, which are demanding a monthly wage increase of 99,000 won (570 yuan) and a bonus of 10 million won this year.

However, GM Korea suffered an operating loss of 316.9 billion won (1.825 billion yuan) last year, as it lost 25,000 vehicles in production due to the strike. At the same time, its car sales in April this year fell 25.4% year-on-year.

SsangYong Motors is undergoing a major restructuring after its parent Indian automaker Mahindra & Mahindra stopped injecting capital. The company is said to have laid off 30% of its senior management, or 10 out of 33 people.

The company's sales in April this year fell 35.7% from the same period last year. Mahindra is reportedly planning to exit the loss-making joint venture and give up control of Ssangyong Motor, in which it currently holds a 75% stake.

The Ssangyong Motor Alliance said, "We oppose restructuring focused on layoffs. If employment is guaranteed, we will cooperate with restructuring measures."

South Korea cuts taxes on chipmakers, boosts budget for auto chip production amid chip shortage

On April 15, South Korea’s Ministry of Trade, Industry and Energy briefed President Moon Jae-in on a series of stimulus measures to support the country’s chip industry, which accounts for 20% of South Korea’s total exports, and will release a separate outline to support the electric vehicle battery business in the first half of this year.

Previously, the Korean chip industry had asked the government to exempt 50% of the tax rate for investment in chip research and development and manufacturing facilities, so that Korean chip companies can have the same fair environment as other global players. The United States has decided to provide a 40% tax exemption for investments related to chip manufacturing facilities. Europe has also announced a $50 billion investment plan, and China has also introduced a corporate tax exemption plan. In contrast, before the new plan was introduced, South Korea provided a 20% tax reduction for companies' newly developed original technologies, but only a 3% tax reduction for facility investments.

South Korea will also promote technological development of automotive chips and respond to supply shortages through linkages between future vehicles and the semiconductor industry. The country will announce its comprehensive measures within the first half of this year.

On April 16, South Korean Finance Minister Hong Nam-ki said the government will significantly increase the budget to support the automotive chip industry and look for projects that can be commercialized in the short term to solve supply problems.

South Korea will also introduce measures to cultivate the labor force needed for the battery industry and prevent the outflow of resources. The country will also set up a special fund to help small and medium-sized enterprises in the battery industry grow. In addition, South Korea will provide support to about 9,000 auto parts manufacturers to help them shift their business to future automotive technologies.