Automotive safety parts maker HKC is redefining standards of quality and cost

While most Korean suppliers have grown by focusing on domestic business, HKC's case is unique, with more than 50% of its revenue coming from international markets. As Korean suppliers gain increasing attention due to the trickle-down effect from Korean OEMs, do you see this as an ideal time to accelerate international expansion and seize new opportunities?

It may already be late. If you visit other countries, you'll find many Korean companies have already established a presence—most of them being Tier 1 suppliers or OEM manufacturers. For small and medium-sized companies like HKC, international expansion presents significant challenges, primarily due to financial constraints. We have limited capital, a smaller workforce, and fewer resources compared to Tier 1 and larger corporations.

Frankly, we started our export business 17 or 18 years ago, and we have been consistently growing in international markets. Today, we export our products to over 25 countries and ship more than 200 million parts annually. Given our scale, we should have already established overseas manufacturing facilities.

Last year, we successfully launched our manufacturing plant in Mexico, focusing on overmolding for batteries. I strongly agree that we must continue expanding our global footprint, as the Korean market is oversaturated. While there are still opportunities in certain niche sectors, most Korean companies have well-established supply chains, making it extremely difficult to secure new business relationships with major domestic players.

This is precisely why we opened the Mexican plant. Our next steps likely involve expansion into Thailand or Vietnam, and if we are fortunate, possibly Europe.

You mentioned the challenge of integrating into the overseas supply chains of Korean OEMs. Can you elaborate on your strategy to overcome them?

As a Tier 2 supplier, we do not engage directly with overseas OEMs. Instead, we work through Tier 1 suppliers, who introduce us to OEMs. This was exactly how we established our Mexican plant—through our business relationship with SK On and Kyungshin Cable. Kyungshin, which supplies SK On, facilitated our entry into the supply chain of overseas OEMs, ultimately leading to our Mexico expansion.

We do not have a fixed ratio or specific balance between Korean and non-Korean OEMs, but we actually prefer working with international OEMs. Our company started by serving global markets, and over the years, we have developed a deep understanding of cultural differences across various countries. This experience gives us an advantage in navigating international business relationships.

Ultimately, we don’t choose our customers—our focus is on responding to the needs of Tier 1 suppliers. In the case of Korean OEMs, their supply chains are already well-established. However, years ago, when Korea was considered a low-cost manufacturing hub, many foreign car makers recognized our management capabilities and technological expertise. Before working with the Korean OEMs, we had already built strong relationships with the global ones.

Do you believe that your extensive experience with foreign companies provides you with a competitive advantage over other Korean suppliers today?

Absolutely. Our competitive edge in international markets comes from two key factors: cost efficiency and superior quality management.

When we first engaged with Ford and Volkswagen, we stood out because of our highly competitive pricing. Over time, we strengthened our partnerships and eventually became the sole supplier of seat belts to these companies. Our exceptional quality management played a crucial role in this achievement.

These two strengths—cost efficiency and quality excellence—set us apart when working with foreign OEMs. Thanks to our long-standing relationships, when global automakers like Volkswagen, BMW, or Audi discuss seat belts, they immediately recognize HKC. That level of brand recognition is a significant milestone for us.

In Korea, there is another company responsible for supplying seat belts to Hyundai and Kia, but HKC is well known among global automotive manufacturers and OEMs. One key reason for this is that overseas OEMs have different, often more rigorous, standards compared to Korean automakers. Our ability to understand, meet, and exceed these international requirements is a core strength.

For SMEs like us, having a proven track record with foreign OEMs is crucial for sustaining and expanding our business globally.

Last year, the automotive industry was sluggish in Europe, while it is estimated that in the U.S. the industry will see its third consecutive year of growth with over 16 million additional cars sold. I’d like to hear your perspective on the industry’s trajectory for this year and beyond. How do you foresee its evolution, and where do you believe opportunities for growth will emerge?

I believe that overall vehicle production will remain stable. While the balance between EVs and hybrids may shift slightly, total production levels should not see drastic changes. Companies like Hyundai and Kia may currently be slowing down, but they will ultimately continue transitioning to electric vehicles.

With Trump as the President of the United States, there are notable policy differences. However, when considering the broader transformation toward hybrid and electric vehicles, I don’t believe automakers will abandon EVs in favor of hybrids alone. The initial production costs for hybrid vehicles are too high for automakers to completely shift their focus away from EVs.

Regarding environmental policies, the global trend is moving steadily toward greener initiatives. Even if President Trump withdraws from the Paris Agreement, this does not necessarily mean a significant rollback of green policies in the long run. I believe the demand for electric vehicles will continue to grow, which is precisely why we stepped into the battery business and opened our plant in Mexico. That said, this transition does not impact our seat belt business. For instance, Kia Motors sold 600,000 EVs last year—two to three times more than the previous year. So, despite the current sluggish EV market for Hyundai and Kia, I anticipate a gradual increase in EV sales over time.

A study on the supply chain industry in Germany has highlighting that the shift to EVs was putting many suppliers under financial strain. Since EVs require fewer components than internal combustion engine vehicles, many suppliers have been forced to adapt and restructure their offerings. Do you view this market transformation as an opportunity or a necessity for diversification?

First and foremost, I would say that we have been very fortunate. Our former CEO had remarkable foresight. HKC has been in this industry for 45 years, primarily focusing on seat belts. As I mentioned earlier, seat belts are not affected by the shift to electric vehicles. Even as we move toward Level 5 autonomous driving, seat belts remain a legal requirement, meaning our core business remains secure despite industry changes.

Additionally, our dedication, effort, and extensive experience have earned us recognition as a company with strong technological capabilities and management expertise. I see this shift in the market as a tremendous opportunity for us—without question. Our entry into the battery market aligns well with our strengths, particularly our experience in mass production. However, I imagine that many other SMEs unfamiliar with large-scale manufacturing will face significant challenges in adapting to the evolving market.

In summary, entering the battery market was the right decision for us, and we view this transition as a major opportunity rather than an obligation.

Battery Module

You mentioned that for 45 years, you have been manufacturing safety equipment, including seat belts. Could you share the biggest milestones in your company’s history, perhaps the most recent one, and how you arrived at your current position?

We started out as a small factory producing parts for radios and video players. In 1986, we entered the seat belt industry, and since then, we have expanded our business significantly. Our most pivotal moment came when we partnered with Autoliv, a Sweden-based company. Autoliv needed a reliable supplier, and we needed an opportunity to grow. This collaboration marked the beginning of our international expansion. As Autoliv is a global company, word quickly spread about HKC’s expertise in manufacturing seat belt components, leading to numerous export opportunities and industry recognition.

We have also earned multiple export awards and hold Hyundai and Kia’s Supplier Quality (SQ) certification in five key sectors: metal stamping, heat treatment, over-molding, welding, and surface treatment.

In 2018, we diversified into the rear-view mirror industry, and in 2022, we received a prestigious award from the South Korean President, recognizing us as a "Root Company." Root Companies are fundamental manufacturing firms specializing in core techniques like casting, molding, welding, plastic processing, surface treatment, and heat treatment. Only a select group of fewer than 50 companies in South Korea have received this honor.

Rear-view mirrors are quite different from seat belts, yet they share commonalities in production processes. How do you want your current and future customers to perceive HKC?

This is something I frequently discuss with my employees—we are no longer just a seat belt manufacturer. HKC stands for Hankook Capability Corporation, and we are an industrial company at heart. From the beginning, our goal was to manufacture a variety of high-quality products, not just seat belts. Now, after 40 years in the industry, I am refocusing our vision to align with our original mission: to be a comprehensive production company manufacturing diverse parts beyond seat belts.

I want HKC to be a company that represents Korea and contributes significantly to the global industry. This is one of the reasons we entered the battery sector. Expanding into new industries allows us to evolve and remain competitive.

Tongue

In addition to your SQ certification and adherence to international standards, you have implemented automation and AI in what you call a "smart, eco-friendly factory." This includes real-time monitoring during production to enhance quality and efficiency. Could you elaborate on the various technologies you have implemented and their impact on productivity?

First, let me outline the key systems we have in place. First is the POP system, which is a real-time monitoring system. Second, MES System (Manufacturing Execution System), a data encryption system for manufacturing. Third, QA System (Quality Assurance System), which ensures product quality management.

Regarding AI, we are still in the early stages of implementation. Currently, parts of our production line utilize deep learning AI for visual inspections. Our goal for this year is to integrate deep learning AI into our real-time monitoring system (POP) to trigger proactive alerts. Additionally, we are working towards implementing the MIS (Manufacturing Information System) to further optimize production efficiency. These two—POP and MIS—are our primary focus for the year.

While we aim to accelerate AI adoption, the high costs and resource constraints make it challenging for SMEs like us. Unlike large Tier 1 companies that can rapidly deploy these technologies, we must carefully manage our cash flow and take a step-by-step approach.

Even though AI is not fully implemented yet, have you already observed any significant benefits from this technology?

Not quite yet. Our AI and deep learning systems are still in their early phases. There is still (a lot of) room for improvement.

We expect tangible results once AI is fully integrated into our real-time monitoring (POP) system. However, progress has been slower than anticipated because incorporating AI for visual analysis—such as image-based inspections—is far more complex than using AI for numerical data analysis. Many unpredictable variables come into play, making the process difficult.

That said, we intentionally chose a more challenging path from the beginning, so while immediate results have been limited, we remain confident in the long-term benefits. We foresee significant improvements in production efficiency and quality control as our AI systems evolve.

With collaborations spanning 34 countries across six continents, HKC’s total revenue has grown from 48.5 billion KRW in 2021 to 67.2 billion KRW in 2024. This growth has been driven primarily by the expansion of your seat belt business and the recent success of new ventures, such as room mirrors. Looking ahead to the next three to five years, what will be the key drivers of continuous growth?

Our sales with Gentex are expected to grow significantly, and we are already supplying our products to a wide range of companies overseas. While certain products are currently limited to specific regions, we are actively working on expanding exports to new markets.

Over the next three to five years, our growth will be fueled by our expansion into the EV battery sector. In terms of revenue, our total sales for 2023 reached 81.5 billion KRW, and for 2024, we are projecting 85 billion KRW. While growth in our business with Autoliv will be steady but gradual, we anticipate the sales of Gentex will rise sharply.

Starting in 2027, we will fully enter the EV battery market, which we expect to generate substantial additional revenue. By 2027, we are targeting 120 billion KRW in annual revenue.

How do you see your client portfolio evolving beyond Gentex and Autoliv in the short term?

Expanding our client base is one of the biggest challenges SMEs face. In the overseas market, strong networking skills are crucial. If we lack those skills internally, we need to bring in people who do.

With Autoliv and Gentex, they approached us first rather than us seeking them out. At the time, we didn’t have the networking capabilities to secure such partnerships ourselves, but once they came to us, we focused on delivering top-tier quality and service, which helped us build lasting relationships.

For the domestic market, we recently hired an expert with strong networking skills and industry connections, and we expect significant expansion as a result. In the international market, we are actively working with KOTRA while leveraging our existing relationships with companies like Autoliv and Gentex to explore new opportunities.

From my experience, two critical factors drive success: first, never becoming complacent, and second, consistently delivering the highest level of service to existing clients and partners. These two principles are at the core of our strategy.

Which region do you believe holds the greatest potential for HKC in the next five to ten years?

Over the next five to ten years, the U.S. market will be our primary focus. The European market, while important, faces challenges such as high labor and energy costs, which have slowed new developments.

We don’t have a specific preference for any market, but based on current global trends, the U.S. presents the best opportunities for HKC. We have already received an order for seat belts for the Ford F-150 pickup truck, which will serve as a foundation for further expansion in the U.S. market.

Regarding Autoliv, the North American market has been leading to increased orders coming to us. Additionally, our business with Gentex is growing rapidly, which is another positive indicator.

While India is currently the fastest-growing automotive market, we have not yet entered that space. However, we see potential in both the broader Asian and Indian markets, and we are carefully considering our next steps.

What type of products are you targeting for expansion in the U.S. market?

Our focus will primarily be on batteries and seat belts. The U.S. presents a strong opportunity for us because, while manufacturing costs there are high, many companies struggle with quality management—particularly in molding technology and production capability. As a result, many U.S. clients are reaching out to us for solutions. We see this as a major advantage and are positioning ourselves to capitalize on the demand.

Given your position as a Tier 2 supplier with extensive international experience, what key message would you like our readers to take away?

I don’t claim to be an industry veteran or an expert with extraordinary skills, but I do want to emphasize one thing: never settle.

Today’s business environment is comfortable, and many people lack the “hungry” mindset needed to drive real progress. My parents built this company with relentless ambition, and when I joined, I did so with the determination to achieve meaningful recognition in the industry. That mindset is what has fueled our company’s growth.

This message applies not only to HKC but to individuals and companies alike. At the end of the day, companies are simply groups of individuals working toward a shared goal. Even if someone doesn’t have a clear long-term plan, they should use their accumulated experience to find a path forward and set new objectives.

That’s precisely why we hired a domestic networking specialist—because we refuse to remain stagnant. In the seat belt industry, HKC is already a well-recognized name. When people hear "HKC," they associate us with seat belts. But this is not our final destination.

My advice? Never settle. Keep pushing toward new goals. There’s always more to achieve. If you have determination and a clear vision, as books like Grit often emphasize, you will find a way to succeed.

For more information about HKC, explore their website: https://www.hkcb.co.kr/