The Short Unhappy Life of Pyeonghwa Motors

December 27, 2012 6:30 AM

Pyeonghwa Motors is no more. The boutique auto assembly plant, a joint venture of the Unification Church and the North Korean government is folding after 12 years of operation. The plant turned out late-model Fiat knock-offs on a micro-scale: according to one former manager, the plant produced roughly 2,000 vehicles in its lifetime, though one press report indicated that the plant produced 2,000 cars annually. Either way, it was extraordinarily small scale production.

All parts and components were imported from China (for dollars or euros); there was no domestic sourcing of inputs and virtually no backward- or forward-links to the rest of the economy. And as Jonathan Pollack observed in a private conversation, despite having a monopoly on commercial automobile advertising the company could not compete with Chinese assemblers. The firm reportedly began to make money in 2009, but multiple audits and the direct intervention of Kim Jong-il were required to remit profits.

The Unification Church has indicated that it plans to sell its 70% stake in the j.v. to the North Korean government. No word as to whether the North Koreans will accept the $20 million asking price.  AP has reported that the Unification Church also plans to shut down a hotel in the North. But multiple South Korean press sources report that the church wants to remain in business in North Korea. It has been reported that Pyeonghwa Motors CEO Park Sang-kwon, submitted an application to the Ministry of Unification of South Korea to start a new business in the North out of the ashes of the old one, possibly in distribution.  There is speculation that the North Korean government will try to keep the auto assembly plant in operation.


Gag Halfrunt

Pyeonghwa Mtors's relationship with Fiat only lasted a few years (the Unification Church has a stake in Mekong Auto, a Vietnamese company which also assembled Fiats). Pyeonghwa's
recent models have mostly come from various Chinese manufacturers. It wouldn't really be accurate to call their cars "knock-offs" in the sense of pirate copies, since they were bought from the original manufacturers and imported as kits of parts for local assembly, something which is quite common in developing countries, albeit with at least some degree of local content. Erik van Ingen Schenau, who runs a consultancy on the Chinese car industry, has a" photo gallery of vehicles made in North Korea, which identifies the original manufacturer for each of Pyongyang's models. He's also written a rather pricey. about the North Korean automotive industry.

Adam Cathcart

Sort of curious update on this issue by China Daily on January 23:

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Marcus Noland Senior Research Staff