PIIE Blog | North Korea: Witness to Transformation
The Peterson Institute for International Economics is a private, nonprofit, nonpartisan
research institution devoted to the study of international economic policy. More › ›
Subscribe to North Korea: Witness to Transformation Search
North Korea: Witness to Transformation

The Short Unhappy Life of Pyeonghwa Motors

by | December 27th, 2012 | 06:36 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.