An empirical study on governance of ‘green car’ innovation in the Republic of Korea BEOM - SIK yOO
Introduction The most prominent Korean carmaker, the Hyundai-Kia Automotive Group (hereinafter referred to as Hyundai) became the seventh automaker in the world to launch a mass-production hybrid-electric vehicle (HEV) in 2009. This is more than 12 years after the launch of the first HEV by the Japanese company Toyota in 1997. However, Hyundai is now aiming to become one of the first to massproduce an electric vehicle (EV). It has recently announced that its first EV will begin sales sometime in 2011, significantly closing the gap with the current front-runner of EV – the Japanese company Nissan – which began its sales of EV Leaf in the United States and Japan in December 2010. Compared to other key automotive manufacturing countries, Korea’s history of so-called green cars is rather short, with the first hybrid being showcased only in 2004. The first-ever prototype of Hyundai’s hybrid vehicle was developed in 1995, but the first publicly showcased (and procured by the government) is the 2005 hybrid version of Hyundai’s Click model (also known as the Getz model in Europe) (see Jung, 2011). HEVs and EVs are now commonly referred to as ‘green cars’ in Korea – influenced by the current government’s ‘Low Carbon, Green Growth’ policy – and for the purpose of this chapter, although there is no set definition for the term, ‘green car’ will be used to refer to these vehicles. The governance arrangements for fostering these new technologies have developed rather quickly in recent years, and now, with an administration that places the environmental agenda as a top priority, the government is working closely with automakers like Hyundai to foster innovation in green car technology. This is definitely a welcome development, because Korea is emerging as an important player in the world’s automotive market. Korea has risen to become the world’s fifth largest automaker, producing around 3.5 million cars in 2009. The Korean automotive industry’s worth is estimated at $109 billion in terms of production (Kwon, 2010). Hyundai, with its manufacturing capabilities spread over seven countries, has an annual production of around 4.6 million cars (2009 figure), making it the fifth largest automaker group in the world. Its sales have continued to grow, from
ranking thirteenth in 1999 to fifth position in recent years (International Organization of Motor Vehicle Manufacturers, 2011). Hyundai’s percentage share in the Korean automotive market is steady, while its shares are growing in other parts of the world, especially in North American and European markets. Sales in Korea are now approximately 20 per cent of the total sales worldwide for Hyundai (Kwon, 2010). There are a number of automakers that manufacture vehicles in Korea, but only Hyundai still retains its original Korean ownership. Most of the automakers have been acquired by foreign companies in the aftermath of the Asian economic crisis in the late 1990s: Daewoo Motors was acquired by GM in 1992; Samsung Motors became part of the Renault-Nissan Alliance in 2000; and Ssangyong has changed owners several times from GM-Daewoo, Shanghai Automotive Industry Co. and recently to Mahinda Group. Currently, Hyundai is the only automaker that has a full-fledged R&D programme on alternative engines – i.e. hybrid-electric and zero-emission vehicles (ZEVs) – based in Korea, while the other automakers mostly depend on their parent companies for such R&D programmes. Hyundai also represents about 80 per cent of the total vehicle sales in Korea. For these reasons this study has focused more on Hyundai than other Korean automakers. This study has looked at the development of green cars – mainly HEVs and ZEVs – during the last decade in Korea. It has identified a number of key governance and non-governance arrangements and activities that influenced the development of green cars during three periods, which have different levels of engagement from the Korean government, and assessed whether key processes for technological innovation were present in each period. Furthermore, it has attempted to analyse how these arrangements/activities have affected the development of technological innovation through a survey of key actors from the government and the Korean automotive industry. The main objective of the survey was to assess the perception of different actors on how effective or influential governance arrangements were in fostering innovation for green cars. The arrangements and activities identified in this study have been selected by the author through his personal experience in the Korean government as a policy regulator, as well as knowledge acquired through reading relevant documents, and the selection was tested and supported by the respondents of the survey as the key arrangements/activities that have shaped the development of green cars. The next section gives a chronological summary of green car development in Korea; the third section presents an analysis of activities through the framework on governance of technological innovation, identified by Hillman et al. (2011) and also discussed in other chapters of this book. Finally, the results of the survey on key actors follows, with some concluding remarks and a brief look at the future challenges.