South Korean automakers are undergoing significant restructuring due to a complex interplay of factors, including competition from Chinese electric vehicle (EV) manufacturers, sluggish domestic demand in emerging markets due to conflicts in the Middle East, and changes in employment structures driven by the adoption of artificial intelligence (AI) and software-defined vehicles (SDVs). This restructuring is viewed not merely as a cost-cutting measure but as a survival strategy through the reorganization of existing business structures.
On July 13, a representative from a global automaker stated, "The shrinking presence of major global automakers like Volkswagen and GM in the Chinese market, which was once a cash cow, has prompted these restructuring efforts. The slowdown in sales in emerging markets, the absence of alternative markets, tariff challenges, and the collapse of global supply chains have all acted as catalysts for change."
Indeed, Volkswagen Group, a symbol of German manufacturing, is facing a restructuring that involves cutting 15% of its workforce due to poor performance in China. Volkswagen's sales in China dropped from 4.2 million units in 2018 to an estimated 2.92 million in 2024, and further declined to 2.69 million last year. Sales in the first quarter of this year are estimated to have plummeted by 36% year-on-year to 425,000 units.
Honda has also struggled to adapt to the shift toward electrification, losing market leadership. The company, which entered the electrification race later than Tesla and local Chinese brands, invested heavily to regain its footing but faced challenges such as a temporary demand stagnation for electric vehicles, U.S. tariffs, and a global sales slowdown. Policy confusion surrounding its traditional internal combustion engine vehicles further complicated its position.
Long-term stagnation in the North American market has led to the cancellation of several electric vehicle projects, including the "Honda 0 SUV," "Honda 0 Saloon," and "Acura RSX." Plans for a large battery factory in Canada have also been scrapped. Additionally, the decision to withdraw from the South Korean market was made amid the global supply chain restructuring. A Honda representative stated, "We will end our automobile sales operations in South Korea by the end of 2026, maintaining only our motorcycle business, as part of a global decision to strengthen our long-term competitiveness."
While automakers globally are restructuring, the atmosphere in South Korea is markedly different. The Hyundai Motor Company union has initiated partial strikes starting today, demanding a monthly wage increase of 149,600 won (excluding seniority raises), a 30% performance bonus based on last year's net profit, a 4.5-day workweek, reinstatement of members dismissed for illegal activities, and an extension of the retirement age. Industry insiders are concerned that the union's actions could be recorded as a case of declining competitiveness amid the transition to AI and SDVs.
Labor disputes are also intensifying at Korea GM and Renault Korea. The Korea GM union is demanding a monthly wage increase of 149,600 won, a performance bonus of approximately 30 million won, allocation of new models to domestic plants, and mandatory prior consultation with the union in cases of mergers or outsourcing. The Renault Korea union has declared a breakdown in negotiations after 12 rounds of talks since starting negotiations in April.
The issue is that there have been few tangible results from strikes following the breakdown of negotiations. After extreme labor disputes, Korea GM relocated the production base for the "Cruze," which was manufactured for export to Europe, from its Gunsan plant to Mexico. Renault, which conducted 60 strikes in 2018-2019, managed to secure its demands in negotiations but saw the cancellation of new allocations for the "Nissan Rogue" produced for export to North America the following year. Hyundai, which has faced severe labor disputes annually, has diversified its supply chain to countries like China, India, and the U.S. since the 2010s. A global automaker representative expressed concern, stating, "In the face of global layoffs, strikes in South Korea could lead to reduced production volumes."
* This article has been translated by AI.
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