[Inside Chodong] Urgent Measures Needed for Chinese E-Commerce

Half of Domestic Electric Buses Are Made in China
Ministry of Environment Belatedly Adjusts Subsidies
A Lesson for E-Commerce Policy Makers

Before the COVID-19 pandemic, consumers using AliExpress (Ali) were few and far between. This was due to the delivery times that took several months after placing an order. Among consumers using Ali, the saying "order and forget" was widely accepted as the norm. There was even an incident like this. Around 2018, before moving, I stopped shopping on Ali three months in advance. Based on experience, delivery took about three months, so I calculated that I wouldn't be able to receive the items after moving. A little over a month after moving, I suddenly received a message from my previous residence saying, "There is a package from China; please come pick it up." It was a keychain I had ordered on Ali and forgotten about four months before moving. The delivery took five months.

But now, things are different. The existing advantage of being inexpensive remains, and delivery has become noticeably faster. This year, I ordered a book stand from Ali, and it arrived in three days. It's cheap, shipping is free, and with delivery in just three days, there is no reason not to use Ali.

Chinese e-commerce platforms represented by Ali and Temu are rapidly growing in the domestic distribution market. Although concerns about product safety and counterfeit goods remain, they are targeting domestic consumers with low prices and faster delivery.

The government has yet to present any significant measures. The Ministry of Trade, Industry and Energy recently held discussions with e-commerce company representatives but has not yet devised any concrete solutions.

The onslaught of Ali and Temu reminds one of Chinese-made commercial electric vehicles. More than half of the domestic electric buses are Chinese-made. According to the Ministry of Land, Infrastructure and Transport, 2,821 electric buses were registered domestically last year, of which 1,528 units (54.2%) were made in China. The market share of Chinese electric buses steadily increased from 22.2% in 2019 to 31.4% in 2022, surpassing domestic vehicles for the first time last year. Chinese electric vehicles sparked controversy as the government provided substantial subsidies upon purchase. There is significant opposition to using taxpayers' money to promote Chinese electric vehicles. Some argue that subsidies should not be given to Chinese electric buses, but trade issues complicate the matter.

The e-commerce market is no different. We must urgently find solutions. Delaying could lead to a situation similar to that of Chinese electric buses. Coupang is the only company currently recording profits in the domestic e-commerce market. The others, in terms of financial strength and operational capacity, find it difficult to compete with Chinese e-commerce companies that have grown into global giants.

Looking at the electric bus policy mentioned earlier, there are implications for preparing responses to Chinese e-commerce. Since last year, the Ministry of Environment has introduced a plan to provide subsidies differentially based on battery density. Considering that Chinese electric bus manufacturers use LFP batteries with lower energy density compared to domestic companies, the plan is to reduce subsidies for Chinese electric buses. This is a desperate measure taken as Chinese electric buses threaten half of the market. However, it should be remembered that even with reduced subsidies last year, Chinese electric buses still sold well. Even accounting for subsidies, the price of Chinese electric buses remains low, and as sales increased domestically, after-sales service (AS), which had been a weakness, has been strengthened, improving competitiveness.

Once market dominance is established, it is not easy to improve the situation. Especially if Chinese e-commerce companies invest massive funds to aggressively strengthen subscription memberships and focus on securing loyal customers, our companies may lose their foothold. This is why we must urgently create protection measures for the e-commerce market starting now.

This content was produced with the assistance of AI translation services.