Price of Car Components Double the Price of a New Car

A recent survey found that the total price of legitimately produced car components embedded in a car amounts to double the price of a new car of the same kind on average.

Unlike other countries, Korea does not allow low and mid-price products guaranteed by official licensing groups. Many call for changes in the current consumption structure where consumers have no choice but to purchase expensive licensed products.

A joint survey conducted by this paper and the Samsung Traffic Safety Research Institute yesterday analyzed the sales prices of six different models produced by the Hyundai-Kia Automotive Group and the market prices of their parts in total (legitimate products). The result found that aggregate price of car parts amounted to 1.9 to 2.3 times that of the new car depending on models.

As the aggregate price excludes extra costs in assembly and tires, the number could go up even higher.

The aggregate price of components in an entry mid-size sedan Avante1.6 including interior and exterior components, electronic parts, and body components was 31.28 million won, 2.3 times that of the newly released car itself at 13.65 million won.

The ratio of total component price to car price was 2.2 for the small-size vehicle Verna1.4, 2.1 for the small SUV New Sportage 2.0, 2.0 for the large SUV Sorrento 2.5, 2.0 for the mid-size sedan NF Sonata N20, and 1.9 for the large sedan Grandeur TG Q270.

In particular, the ratio was high for compact and entry level cars with small engine displacements, which indicates higher repair costs for drivers.

Behind this discrepancy in the six models is a monopolistic supply system implemented by Hyundai Mobis, an affiliate of the Hyundai-Kia Automotive Group, and lack of non-licensed products by SMEs in the Korean auto parts market. Indeed, a survey by Samsung Traffic Safety Research Institute on distribution channels of 39 models from Hyundai-Kia, GM Daewoo, Renault-Samsung, and Ssangyong showed that similar generic car components were not carried in auto repair shops.

Apparently, it seems that small- and medium-sized auto parts businesses are not placing their products on the market due to low brand recognition. Some repair shops even deceive customers by making generic products appear to be legitimate products.

In contrast, advanced countries are easing burdens on consumers by introducing quality assurance systems not just for legitimate products but for low- and mid-price products.

In the U.S. and Japan, prices of generic items guaranteed by auto parts associations account for 60 to 70 percent of legitimate products’ prices, though the situation regarding licensed products is similar to Korea.

Hong Seung-joon, a senior researcher at the Samsung Traffic Safety Research Institute said that a quality assurance system should be in place for parts proven to be irrelevant to passenger safety, such as doors, headlights and hoods.

legman@donga.com