[Shaken K-Automotive]① Era of 1 Million EVs: Losing Home Ground

Market Share of Chinese EVs Surges by 32 Percentage Points in Four Years

"Chinese EVs Grown by Government Support"

"Korea Should Consider Support Within Legal Limits"

The number of registered electric vehicles (EVs) in Korea has surpassed 1 million, but the dominant players in the market are changing. In the first quarter of this year, the best-selling EV was the Tesla Model Y, and BYD, the global No.1, has quickly established itself by surpassing 10,000 cumulative sales in just one year since its entry. With the influx of American and Chinese brands, Korean automakers are even losing ground in their home market. At the root of this shift is a regulatory gap. The United States is strongly protecting its domestic industry through the Inflation Reduction Act (IRA), while Japan is doing so with its Strategic Fields Promotion Tax System. China, too, is providing comprehensive support to its domestic EV industry through subsidies and tax incentives. In contrast, even companies that manufacture cars domestically in Korea are not receiving adequate support. As a remedy, the introduction of a "domestic production promotion tax system" is being discussed.

BYD SiLion 7. BYD Korea

According to an analysis by the Korea Institute for Industrial Economics and Trade on the 19th, the share of Chinese-made vehicles in the Korean EV market was only 1.1% in 2021, but soared to 33.1% last year. During the same period, the share of Korean-made EVs dropped from 74.2% to 57.9%, a decrease of 16.3 percentage points. The overall share of imported vehicles also rose sharply from 25.8% to 42.1%.

What is particularly concerning is that not only Chinese brands but also foreign companies with factories in China are rapidly taking over the Korean market. The most prominent example is Tesla, which ranks No.1 in imported vehicle sales in Korea. Tesla's Model Y and Model 3, produced at its Shanghai plant in China, sold nearly 60,000 units in Korea last year alone. In effect, "Made in China" EVs now top the list of imported vehicle sales. Considering China’s strategy of making eco-friendly vehicles a core export driver, its aggressive targeting of the Korean market is expected to intensify further.

The rapid rise of BYD can be seen as the opening act. Despite skepticism about the Chinese brand, BYD entered the top 10 in the imported vehicle market last year by selling 6,107 units, and from January to April this year alone, sold 5,991 units, propelling it to 4th place. In just four months, BYD matched its full-year sales from last year. Its flagship models, the SiLion 7 and Atto 3, are rapidly expanding their customer base by offering prices hundreds of thousands to up to 10 million won lower than equivalent Korean-made EVs. Additionally, new entrants such as Zeekr, a subsidiary of Geely Auto Group, are also entering the Korean market, further accelerating the expansion of Chinese brands.

The key to the success of Chinese EVs lies in cost competitiveness that is difficult for other countries to match. BYD has pushed prices down to the point where its EVs are comparable in price to domestic internal combustion engine vehicles of the same class. This is the result of in-house battery production, a vertically integrated parts supply chain, and all-encompassing support from the Chinese government. China not only provides purchase subsidies for EVs, but also supports research and development (R&D) tax credits, production infrastructure such as electricity and land, and even core mineral supply chains at the national level, giving domestic companies a significant cost advantage.

In contrast, Korea remains focused on demand-side incentives such as purchase subsidies, and lacks institutional measures to directly support companies that build and operate factories domestically. This stands in stark contrast to the United States, which offers the Advanced Manufacturing Production Credit (AMPC) to companies, and Japan, which supports domestic production of key industries such as EVs and semiconductors for 10 years through its Strategic Fields Promotion Tax System.

There is growing consensus that industrial policy needs to shift beyond simply expanding subsidies, and toward providing real incentives to companies that manufacture in Korea and create domestic jobs. An industry official stated, "Korea should also consider providing sufficient support within the bounds of legality to avoid trade friction."

Lee Hoguen, Professor of Future Automotive Engineering at Daedeok University, said, "The cost difference between Chinese-made parts and parts supplied by domestic companies to finished vehicles is so large that it is virtually impossible to compete in terms of cost-effectiveness (price/performance). If a domestic production promotion tax system not only benefits large corporations, but also lowers the price of domestically produced vehicles exported overseas, the entire industry ecosystem could benefit."

Lee Hanggu, Research Fellow at the Korea Automotive Technology Institute, advised, "Since the global automotive market is moving toward EVs and future vehicles, providing tax credits for investments in converting existing facilities to future vehicle production could benefit the entire automotive industry."

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