[Inside Chodong] To Ensure "Top 3 Future Vehicle Power" Is Not Just Empty Words

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It is a highly rational decision for the management of General Motors (GM) in the United States or Renault's headquarters in France not to produce electric vehicles at their Korean plants at this point. Electrification is an unstoppable trend, and both Korea GM and Renault Korea have their own competitiveness among global sites. However, converting the internal combustion engine-focused processes to enable electric vehicle production requires considerable investment, and it is inevitable to conclude that it is better to invest elsewhere rather than at the Korean plants.

Due to the declining economic viability of producing internal combustion engine vehicles using existing facilities, domestic production volumes have been reduced over the past few years. There is no reason to entrust electric vehicle production, which requires new investment, to Korea. The domestic market is not as large as in the United States or China.

The mobility industry is considered to be in a period of upheaval because not only is the powertrain system, which has lasted for over a century, changing, but electronic devices and software are becoming intertwined, and various upstream and downstream industries are also mixing. This is why companies are concerned not only with adaptation but also with survival. The speed and scope of change are so steep that they are hard to compare with any previous period. Is Korea suitable as a hub for future vehicles?

President Yoon Seok-yeol, who has promoted himself as the ‘No. 1 Salesperson,’ visited an automobile plant once again just a month after his previous visit last month. He pledged to support companies with policies to leap forward as a ‘Top 3 Future Vehicle Power.’ The automobile industry is regarded as a pillar amid difficulties in the export front caused by the downturn of our main industries such as semiconductors and petrochemicals. Despite the ongoing impacts of infectious diseases and wars, exports have increased, and the possibility of becoming the top in trade balance for the first time in nine years has grown.

However, a closer look reveals that it is not entirely reassuring. It is not only Korea that has performed well. Among the top five countries with the highest automobile exports, only the United States has a lower growth rate than Korea. Traditional automotive powerhouses such as Germany and Japan have exported more and increased their volumes more than Korea. China, which has been the world’s largest automobile producer for 20 years but focused more on domestic consumption than exports, has now caught up to Korea’s export ranking by leading with electric vehicles.

There are also question marks about whether Korea has competitiveness as a production hub for electric vehicles. Due to the complex value chain of automobiles, it is important to establish manufacturing infrastructure within a certain region. Once an ecosystem is established, it is not easily shaken. The electric vehicle ecosystem is just taking its first steps. So far, it has strongly relied on existing internal combustion engine infrastructure, but as the market recognizes its potential, companies are considering production hubs and gradually putting plans into action. The United States, where electrification has been slower compared to China and Europe, is also investing huge financial resources to attract electric vehicle factories for the same reason.

Given the president’s influence, there is interest in whether ministries that have been lukewarm about the automobile industry will actively engage. Fortunately, tax support for future vehicles has been increased, and new laws that can promote innovation in the mobility industry have been enacted. The industry is regarded as an advanced sector, and trade strategies will be refined more precisely. However, improving systems alone does not immediately make companies view Korea as an attractive investment destination; that is a different level of challenge.

There are still many obstacles and insufficient incentives in the process of foreign companies investing. The difficulty of investing in the metropolitan area under the name of balanced national development is also an obstacle. Elon Musk, CEO of Tesla, the world’s largest electric vehicle company, once mentioned the possibility of establishing a Korean factory during a meeting with President Yoon. It did not take long to realize that it was merely lip service.

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