Korea's China dilemma deepens as Chinese carmakers expand strategic influence
Gov't urged to provide tax benefits to carmakers with local production base
BYD Korea's Sealion 7 is displayed at its showroom at the Starfield Anseong shopping mall in Gyeonggi Province. Courtesy of BYD Korea
Chinese carmakers are rapidly cementing their presence across Korea's automotive industry by expanding beyond low-priced electric vehicles (EVs) into strategic investments and critical supply chains.
This puts their Korean counterparts in a state of growing dilemma over their future strategy, as the pace of Chinese carmakers’ inroads is widely seen as much faster and far-reaching than expected.
The latest in a series of such moves came on Sunday when KGM signed a strategic investment agreement with China’s Chery Automobile. Under the agreement, Chery will invest $75 million in KGM and jointly develop mobility technologies with the Korean automaker.
The deal followed the rapid expansion of BYD Korea. The Chinese EV maker entered the Korean market in January 2025, and rose to become the nation’s fourth-largest imported carmaker in the first half of this year.
Reflecting on the success of BYD Korea, other Chinese carmaker, such as Zeekr and Xpeng, prepares to enter the market directly.
The developments suggest Chinese players are shifting from simply exporting vehicles to building a longer-term presence in Korea, a market traditionally dominated by Hyundai Motor and Kia.
The timing coincides with a dramatic rise in Chinese-made vehicle sales.
Zeekr's 001 FR high-performance electric vehicle is seen at its showroom in Seoul. Korea Times file
According to the Korea Automobile & Mobility Association, China became Korea's largest source of imported vehicles in the first half of this year for the first time, overtaking Germany.
Chinese-made vehicles accounted for 41.2 percent of imported passenger car registrations during the January-June period, compared with Germany's 30.1 percent. A year earlier, Germany led with a 40.3 percent share.
The surge was fueled largely by Tesla models manufactured at its Shanghai plant, alongside growing sales of BYD vehicles produced in China.
The figures also underscore a broader structural shift in Korea's auto market.
Electrified vehicles, including hybrids, all-electric cars and hydrogen fuel-cell models, accounted for 57.8 percent of all new registrations in the first half here, surpassing the 50 percent threshold for the first time.
For Korean automakers, the challenge extends well beyond vehicle sales.
China already dominates global battery materials and components, with companies, such as CATL, tightening its footprint as the world’s largest EV battery supplier.
China's Chery Automobile President Zhang Guibing, left, speaks after clinching a strategic investment agreement with KGM at Grand Hyatt Seoul, Sunday. At right is KGM CEO Hwang Ki-young. Yonhap
The KGM-Chery partnership illustrates the changing dynamic. What began as a technology collaboration has now expanded into an equity investment, highlighting how Chinese automakers are seeking strategic footholds rather than remaining export-oriented competitors.
Auto industry officials also believe Chery could eventually enter Korea under its own brand if early launches by Zeekr and Xpeng demonstrate sufficient consumer demand. The move would further intensify competition in the country's fast-growing EV market.
The influx of Chinese EVs could produce clear consumer benefits by increasing price competition and expanding model choices. At the same time, however, the trend could place growing pressure on Korea's manufacturing base and automotive supply chain.
Industry officials echoed those concerns, arguing that policy support has not kept pace with the market's transformation.
"As Chinese EV makers strengthen their presence not only globally but also in Korea, the competitiveness of our domestic manufacturing base and supply chain is coming under greater pressure," an industry official said.
"The government should consider expanding tax incentives for domestically produced EVs to strengthen local production."