hankyoreh

GM Korea’s production plant in Gunsan. (Hankyoreh Archives)

Myoung Shin – the company that acquired GM Korea’s Gunsan plant after it was closed down last year – and its parent business MS Autotech are primary partner companies to Hyundai Motor, but remain little-known to the South Korean public. Various analyses have been offered on the reasons behind its move to produce electric cars directly, running the risk of souring relations with its employers at Hyundai Motor.

“Hyundai Motor may view it as disgraceful, but we showed the courage to make an effort to change the automobile industry paradigm,” explained Park Ho-seok – who has directed the formation of an MS Autotech task force and led a consortium for the Gunsan factory acquisition – in an Apr. 21 interview with the Hankyoreh.

“The big picture we are drawing right now involves building a new electric vehicle ecosystem around Gunsan,” he added.

A former employee of Hyundai Motor, Park explained that he and Myoung Shin CEO Lee Tae-gyu – also formerly with Hyundai – prepared for the acquisition after GM Korea’s decision to close the Gunsan plant in February 2018. Among the MS Autotech management, many assumed that because the two had histories working for Hyundai Motor, their move to acquire the Gunsan factory was going ahead with the automaker’s understanding.

“The situation is such that we have to take note of how Hyundai Motor responds, so there are a lot of difficulties,” Park said.

“Indeed, there are quite a few parts companies that have declined to take part in the consortium for the same reason,” he added.

Late last month, Myoung Shin signed an agreement with GM Korea for the sale and acquisition of the Gunsan factory. The company agreed to acquire the land and buildings for 113 billion won (US$99.02 million), with a down payment of 10%. The scheduled acquisition date on June 28, by which time the remaining amount must be paid.

Industry observers said the parts companies’ decision to acquire the Gunsan plant and enter the electric vehicle business was intended to find a new outlet amid a shift in automobile industry structure toward more eco-friendly areas. Due to its simple structure in terms of parts, entry barriers to the electric car business are not high; in addition to Tesla, IT companies like Google and Baidu have entered the market, along with vacuum cleaner maker Dyson.

But not all electric vehicle businesses prove successful. In addition to the cumbersome certification procedures prior to final mass-production, the supply glut translates into difficulties opening up new markets. In China, the proliferation of electric car companies has prompted talk of restructuring.

“Even if the entry barriers are low, it takes quite a bit of time before mass-production of the final product,” said the CEO of a South Korean company identified by the initial “K,” which is currently involved in the production and sale of electric vehicles.

“Since there’s an inevitable process of trial and error from production all the way through to certification, sale, and post-management, you also have to swallow the associated opportunity costs,” the CEO explained.

According to industry insiders, annual sales of over 150,000 vehicles are needed to achieve a balance of profits and losses. Following the completion of the factory acquisition along with additional repairs, renovations, and facility investment, the consortium behind the Gunsan factory acquisition plans to produce 50,000 electric vehicles per year beginning in 2021. That production volume is then to be increased to around 150,000 per year by 2025. The consortium reportedly plans to adopt an approach of partnership with automobile companies in Europe and elsewhere around the world, producing the vehicle on commission under an original equipment manufacturer (OEM) arrangement or acquiring parts from China and other countries to assemble and produce vehicles for sale in Southeast Asia and other markets.

“We’re in discussions behind the scenes with potential partner companies, while things like the companies submitting orders, the models to be produced, and the markets haven’t been decided yet,” Park said.

Established in 1990, MS Autotech is a company specializing in the manufacture of chassis components, with its headquarters and factory in Gyeongju, North Gyeongsang Province. In addition to core affiliate Myoung Shin, it has seven other corporations in South Korea, including the mold production company MS T, along with five overseas subsidiaries in countries including the US, China, India, and Brazil. It was established by Chairman Lee Yang-seop, a former president at Hyundai Motor whose son Tae-gyu serves as CEO of its chief affiliate. Consolidated sales totaled 900 billion won (US$788.32 million) last year.

By Hong Dae-sun, staff reporter

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