Roadblocked

Hyundai hopes for better times

Battery drain is a bugbear for the smartphone and electric car industries – a problem that technicians are continually trying to solve. But for battery makers in South Korea there’s a new problem: losing the talent capable of solving the issue.

The Korean press has been bothered by signs of a growing brain drain as up-and-coming Chinese firms poach the nation’s most talented tech staff. News agency Yonhap says the country’s leading lights, including LG Chem, Samsung SDI and SK Innovation, are being forced to deal with rivals offering salaries that are three or four times higher. An industry expert with a 10-year track record can command a basic salary of about $350,000 to $400,000 if they are prepared to move to China, the agency reports.

The Korea Herald says Shenzhen giant BYD is offering all sorts of incentives for South Korean nationals prepared to move to China, for instance. Great Wall has taken a different route, setting up a research centre in Korea and hoping to hire 20 specialists this year. That number may grow to 70 by the end of next year (LG Chem currently supplies Great Wall’s batteries).

Lee Ho-geun, a car industry specialist from Daeduk University, tells the newspaper that Chinese firms need to poach Korean staff because they are “way behind”. He also thinks his government needs to take action “to protect a key industry”.

South Korean leader Moon Jae-in is scheduled to visit China next week and he has tabled electric batteries as an issue for discussion. In particular, he wants the Chinese government to put Korean firms in China on a level playing field with their local competitors by making them eligible for similar state subsidies.

Observers will watch for signs of further improvements in Beijing’s relations with Seoul, following more than a year of diplomatic frostiness prompted by Seoul’s decision to install the THAAD anti-missile weapons system.

Beijing responded to that move with a slew of unofficial sanctions, which included curtailing tourist flows to South Korea.

Netizens meanwhile focused more on the disappearance of popular Korean stars from China’s entertainment sector, in another of the retaliatory measures initiated informally by Beijing (we first reported on this in August 2016 in issue 336).

The People’s Daily is now hopeful that the mood can return to business as normal. It agrees that “an improvement at the national level has opened the door to warmer relations” but it suggests its citizens may be less forgiving and the chief test will be how quickly they “reopen their wallets”.

One of the key litmus tests of better relations between the two governments is car purchases. Sales of South Korean brands have been hit hard. In the first half of the year they almost halved (430,947 compared to 808,359 in 2016). Since then, sales have shown signs of improvement. In October, Beijing Hyundai and Dongfeng Yueda Kia sold 122,521 cars, down 23.5% compared to 2016. Analysts say it took the Japanese car makers nine to 12 months to recover from a foreign policy dispute in 2012 (over a contested island) and believe Korean sales are recovering faster than expected.

National Business Day has argued that there is more to the slowdown in car sales than the row over THAAD. It quotes Cui Dongshu from the National Passenger Car Information Exchange Association, who says that Korean manufacturers are failing to respond to the needs of Chinese consumers. Others argue that local manufacturers have closed the quality gap that used to exist with foreign brands, making overseas models less attractive. Commentators have also pointed out that sales growth is being driven by upgrades to larger sports utility vehicles, where Chinese brands are starting to do well, accounting for about 58% of all SUV sales.

Not everyone is convinced. “Don’t bullshit me that domestic car quality has gone up,” says another netizen. “Korean car sales are down for only one reason: THAAD.”

“Sales have picked up recently, but we are far from our goal,” Beijing Hyundai’s Cheng Guixiang told NBD. “Next year isn’t going to be easy given how hard it’s been this year. It’s going to take about two to three years to climb back up.”

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