Toyota in Talks to Start Buying Parts from Hyundai

In yet another sign of the eroding market position of Japan’s leading carmakers, Toyota may follow other Japanese automakers in importing key parts from South Korean suppliers, said Japanese auto industry sources.

Toyota invited about 40 companies, including Hyundai Mobis, a member of the Hyundai Group, for negotiations in Seoul on Dec. 15-16. The discussion will center around key components used in engines and brakes. Hyundai Mobis is one of the world’s leading automotive parts suppliers, with consolidated annual sales of about 900 billion yen ($11.54 billion).

If it contracts with S. Korean parts makers, Toyota will be abandoning its position as the last Japanese carmaker to use exclusively Japanese-made parts for cars built domestically. Nissan and others are gradually using more S. Korean parts due to a combination of dramatic quality improvements and the high yen which makes domestic parts prohibitively expensive and S. Korean parts a bargain. Recently the exchange rate has risen to 15 won per yen, nearly twice the yen’s value in 2007.

A deal with Hyundai Mobis would result in Korean parts for vehicles to be produced in 2013 and later.

Toyota, formerly the world’s top car maker, fell to third place in 2011, behind General Motors and Volkswagen. The Hyundai Group was fifth in the world in terms of new car sales in the first half of 2011.

Japanese auto parts makers, who number in the thousands, employ about 600,000 in Japan. Recently the industry has been struggling to stay profitable as more car makers turn to Korean parts.