Comparative Analysis on the Auto Parts Imports Intensity Index and Implications on Korean SMEs

Abstract

This paper examines the current status of the auto parts industry by creating the Auto Parts Imports Intensity Index. COMTRADE data from 2000 to 2017 was used for imports of automotive and auto parts to see how imports of finished car and auto parts have different interdependent relationships in specific countries. Two categories were selected for international comparison; the first category includes automotive manufacturing developing countries such as China, India, Indonesia and Russia. And the second category includes developing countries that just import cars, which are typically Middle East Countries. The results found that direct exports from Korea shows a weakening trend over-all. The decreasing sales growth of automobiles brings the high values of index specially in Chinese market. In contrast, the index value shows balanced pattern in most of countries for German cars. The different patterns between Korea and Germany can be partially explained by the excessive vertical industry structure of Korea and empowering SMEs of Germany. Implications are the following; first, the government should support SMEs to enhance their capabilities like German SMEs. Second, opportunities for auto parts industries are still strongly present. As developing countries in the first category increase their local production, the demand for reliable low-cost car parts has also increased. Therefore, Korean auto parts SMEs should explore these possibilities through the inclusion to global value chain. As for the second category, targeted efforts to diversify markets are required.