Korea’s imported car market undergoes major transition to eco-friendly vehicles

A-3D printed miniature model of Tesla CEO Elon Musk's face and its corporate logo are seen in this July 23 photo. Reuters-Yonhap

The nation’s imported car market is entering a major transition toward the mass adoption of eco-friendly vehicles, driven by rapid sales growth from brands such as Tesla and Lexus, which have established strong identities in electric vehicles (EVs) and hybrid cars, respectively, according to data and industry officials on Friday.

The trend is evidenced by the two carmakers’ sharp sales growth in Korea. According to data from the Korea Automobile Importers & Distributors Association (KAIDA), Tesla's sales soared 32.4 percent year-on-year to 26,569 between January and July.

While Tesla ranked third in total auto sales during the same period, behind BMW Korea and Mercedes-Benz Korea, its rise poses a serious challenge to the German carmakers, as the U.S. EV maker led the market in electric vehicle sales.

Tesla's Model Y / Courtesy of Tesla

In July, Tesla rose to fame as the nation’s top-selling foreign carmaker, buoyed by strong demand for its Model Y electric SUV. Tesla sold 7,357 cars last month alone, up 12.2 percent from a year earlier, outpacing BMW Korea, which sold 6,490 vehicles during the same period.

Industry officials say customer perceptions of EVs have improved, with both domestic and foreign carmakers launching diverse EV lineups with longer driving ranges and more competitive prices, compared with the early years of EVs.

“Fewer customers have anxiety over purchasing EVs, as carmakers launch diverse electric lineups by fixing frequently-mentioned EV downsides, such as their relatively high prices and risks of battery fire,” an auto industry official said.

Lexus Korea's ES 300h / Courtesy of Lexus Korea

Lexus is another major overseas brand enjoying solid sales of its hybrid vehicles here. Data from KAIDA showed Lexus sold a total of 8,963 vehicles in the first seven months of the year, up 19 percent from a year earlier.

This was driven by healthy sales of its ES 300h hybrid sedan. The Japanese carmaker relies heavily on the vehicle for its Korean business. The carmaker sold more than 6,500 ES 300h sedans last year alone.

However, sales from other brands with relatively weaker brand identities in eco-friendly cars suffered declining sales.

Volvo Car Korea, which secured the fourth spot in the nation's imported car market last year, is at risk of yielding its position to Lexus. The Swedish carmaker sold some 7,700 cars between January and July, down 9.5 percent from a year earlier. Lexus outpaced Volvo and jumped into the fourth position during the same period on the strength of the booming hybrid industry.

The same held true for Volkswagen and Toyota, both of which reported sales declines of 11.5 percent and 1.9 percent, respectively, during the same period.

Some other industry officials said Korean customers’ preference for the brands with expertise in eco-friendly cars is expected to continue for the time being.

“In recent years, Tesla has successfully appealed to young Korean customers with its trendy brand image, while Lexus has long built a reputation for reliability among the middle-aged," another auto industry official said. "Both brands continue to strengthen their identities as specialists in EVs and hybrids, which are unlikely to be challenged by rivals in the near future."