Experts recommend a major overhaul of subsidies to prevent Chinese and other imported electric vehicles from shaking the foundation of the domestic industry. South Korea only sets a price cap for electric vehicles regardless of their origins, leading to a steady increase in imported electric vehicles.
"In principle, it is not possible to discriminate against certain products under the World Trade Organization or free trade agreements, but countries around the world are already subsidizing their electric vehicle industries," Lee Ho-geun, a professor of automotive science at Daedeok University, said, calling for a policy switch to provide favored subsidies to domestic companies.
Data compiled by the Korea International Trade Association (KITA), a private trade organization, and KOTRA, a state-funded trade and investment promotion organization, showed that China sold as many as three million electric vehicles on their home soil in 2021, up over 160 percent from a year ago. About 500,000 electric vehicles were sold in the United States and about 40,000 in South Korea during the same period.
In 2022, total electric vehicle sales in China are projected to reach about five million, earlier than Beiing's initial target year of 2025. Confidence is building among Chinese policymakers that their country has achieved an economy of scale and independent market-led growth.
"There are 20 million to 25 million cars sold in China for a year, and five million of them are electric vehicles, meaning that the proportion of electric vehicles is up to 25 percent." Kim Pil-soo, an automotive engineering professor from Daelim University, told Aju Business Daily. "China is self-sufficient in (battery) raw materials, so it has more flexibility than Korean companies."
Beijing has changed its policy to suspend subsidies for electric vehicles after 2022, sending Chinese electric vehicle companies going beyond domestic markets to countries that provide subsidies. The proportion of Chinese electric commercial vehicles and two-wheeled motorcycles in South Korea is already increasing.
South Korea's Hyundai auto group has seen remarkable growth this year. Hyundai Motor sold 31,672 electric cars in the first half of 2022 and its subsidiary, Kia Motors, sold 23,192 for a total of 54,864 units. Meanwhile, Tesla is losing its strength due to an offensive by domestic and German brands.
Tesla's first-half sales fell to 6,746 units from 9,705 units a year earlier, according to Carisyou, an auto market research body, and the Korea Automobile Importers & Distributors Association. Mercedes-Benz sold 1,395 electric vehicles in the first half, up from 337 a year ago, while BMW's first-half sales rose from 76 to 1,238. German brands are willing to expand their market share in the second half, utilizing their excellent ride and driving performance in internal combustion engines, an increased mileage of batteries, and an expanded lineup.
Experts say that Tesla's sales decline is not temporary due to quality problems and high prices. "I can't deny Tesla's innovation in electric vehicles, but it was predicted that the game would change as prominent global carmakers focused on the electric vehicle market," Lee said. "Tesla's era of dominance in electric vehicles will change significantly starting this year," he said, pointing to upcoming Japanese and Chinese electric cars.
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