Korea’s auto industry exposed to bigger threat from Chinese, US carmakers

Vehicles are parked for export at a port in Pyeongtaek, Gyeonggi Province, Friday. Yonhap

Korea’s auto market faces mounting pressure from both U.S. and Chinese carmakers, while its own vehicle exports to the world’s two largest economies continue to falter.

If the trend persists, it could undermine the competitiveness of the local economy and domestic carmakers amid ongoing global trade uncertainties and rising protectionism.

The concerns are backed by multiple data. According to the Korea Automobile Importers and Distributors Association (KAIDA), sales of U.S. vehicles in Korea jumped 40.1 percent in May from a year earlier, driven by the strong popularity of Tesla’s electric vehicles (EVs).

On the other hand, Korean carmakers struggled in the U.S. market, with their auto exports to the United States dropping by more than 30 percent during the same period, hit hard by the impact of the recently imposed 25 percent U.S. auto tariff.

According to the Ministry of Trade, Industry and Energy, Korea’s auto exports to the U.S. came in at $1.84 billion (2.5 trillion won) in May, down 32 percent from a year earlier. The figure extended a losing streak from April when it reported a drop of 19.6 percent. U.S. President Donald Trump introduced the auto tariff in early April.

A Model Y is seen at the Tesla stand at the VivaTech conference, one of Europe's biggest technology industry expos, in Paris, Wednesday. AP-Yonhap

This is in contrast to the increasing presence of U.S. carmakers in the Korean auto market.

Tesla sold 6,570 EVs here last month, up 57.7 percent from the previous year. This is the highest among all the imported carmakers doing business here. Tesla accounted for almost 90 percent of total U.S. auto sales here, outnumbering those from traditionally-beloved luxury German automakers such as BMW and Mercedes-Benz.

Korea’s auto market is also sandwiched by rapid inroads from ultra-cheap Chinese EV makers. BYD, which started its business here early this year, reported accumulated vehicle sales of 1,066 in the first five months of the year.

The Chinese EV maker ranked as the seventh-largest imported EV brand in Korea during the same period. Given the period of its business operations here, the figure is noteworthy. BYD has been able to rapidly rise in the rankings with its price-competitive EVs.

Korean auto brands, however, have long struggled to expand their presence in the Chinese market, where a number of Chinese auto brands dominate with affordable EV lineups.

Other Chinese brands, including Zeekr, are also trying to enter the Korean market in the latter half of this year after seeing the sales potential, as evidenced by BYD's performance.

Cho In-chul, managing director of passenger vehicles at BYD Korea, introduces its Atto 3 electric SUV during the brand's debut event in Incheon, Jan. 16. Yonhap

Industry officials believe that the trend will continue unless the government succeeds in its ongoing trade negotiations with the U.S.

“The U.S. is the largest auto export destination for Korea, but the auto exports are on a rapid decline in the aftermath of the tariff imposition,” an auto industry official said.

“Carmakers cannot tackle the growing trade risk on their own, so the government needs to focus on reducing the tariff in the talks with the U.S. at a critical time when Trump steps up his provocative rhetoric to increase the auto tariff."