Korea urged to regulate influx of low-priced Chinese EVs
A general view of visitors looking at models from BYD, a Chinese car manufacturer, during an event a day ahead of the official opening of the 2023 Munich Auto Show IAA Mobility in Munich, Germany, Sept. 4. Reuters-Yonhap
The Korean government is being urged to impose more environmental charges on Chinese electric vehicles (EVs) mostly equipped with non-recyclable lithium iron phosphate (LFP) batteries, as local EV manufacturers are feared to fall victim to a planned influx of low-priced Chinese EVs, experts and industry officials said Tuesday.
This reflects escalating concerns voiced by domestic carmakers as BYD prepares to enter the Korean market. Last year, the Chinese EV and battery manufacturer applied for trademarks here for six EVs. As customers still remain sensitive to EV prices, BYD’s price-competitive EVs are expected to pose a threat to Korean competitors.
According to a report by the Korea Automobile & Mobility Association (KAMA), more countries are considering introducing diverse policies centered on protecting their own EV industries from the potential threat posed by Chinese carmakers.
The report said the European Union is considering punitive tariffs on imports of Chinese EVs to protect carmakers in the region. Japan is also scheduled to adopt a policy of cutting corporate taxes on local companies producing EV batteries and semiconductors, according to the report.
But no specific policy-wise measures have so far been introduced here to support Korean carmakers as protectionist policies are being considered abroad.
Experts and industry officials underscored the importance of Korea’s characteristic as an export-driven economy. They argued that the government should not introduce overly nationalistic policies, such as a sales quota system, which could end up triggering trade conflicts with bigger economies.
“The government should consider imposing environmental improvement charges on Chinese EVs equipped with LFP batteries, as they are not recyclable,” said Kim Pil-soo, an automotive technology professor at Daelim University College.
He also stressed the need to preemptively enhance communication with the World Trade Organization (WTO) to give local companies competitive edges in their EV export strategies.
“The worst thing is to introduce some overly nationalistic policies, because such a stance does no good to boosting carmakers’ exports,” he said.
An official at one domestic carmaker also said the government should follow the moves of other countries taking legal and administrative measures to back up their local companies.
“For instance, the government needs to consider offering more subsidies for locally-made EVs and batteries,” the source said.
Korea International Trade Association (KITA) data showed Chinese EV battery imports topped $4.47 billion (6 trillion won) between January and August of this year, up 114.6 percent from 2022.
Other data from the Korea Automobile Importers & Distributors Association (KAIDA) also showed that sales of imported EVs here rose 54.8 percent for the first eight months of this year compared to the same period of 2022. The figure for August also marked a 72.2 percent increase from a year ago.
EVs with price-competitive LFP batteries are gaining more traction with customers. More than 4,000 Tesla Model Y EVs, equipped with LFP batteries from China’s CATL, were sold in Korea last month. This is up almost 10 times compared to August.
The proportion of LFP batteries in the global EV market is on the sharp rise, according to data from the International Energy Association. The figure surged to 27 percent in 2022, up from 6 percent in 2020.