Musk Says Korea Is One of the Top Candidates
South Korean President Yoon Suk-yeol has requested Tesla CEO Elon Musk to build a Gigafactory in Korea, the President's Office said on Nov. 23.
Musk responded by saying, “We are considering Korea as one of the top investment candidates.” Musk also expressed his will to invest in Korea’s electric vehicle charging infrastructure, saying, “Tesla is still using many excellent Korean parts in autonomous driving and artificial intelligence-related fields.”
President Yoon and the Tesla CEO had a video conference for about 30 minutes, said Choi Sang-mok, a senior secretary for economic affairs in the presidential office. After hearing Musk’s plans, President Yoon said, “Please invest in Korea, which has a world-class automotive industry ecosystem and investment conditions.”
Referring to the successful launch of the Korean launch vehicle Nuri in June this year, Yoon proposed a close cooperation between SpaceX and Korean space companies. SpaceX is a space exploration company founded by Musk.
Currently, Tesla is negotiating with the Korean Ministry of Trade, Industry and Energy over the plant site. “We are discussing several candidate locations and concrete results are expected to come out next year,” a Korean government official said.
Currently, Tesla’s Gigafactories are located in Nevada of the United States, Berlin of Germany and Shanghai of China.
Tesla has been considering building a second Gigafactory in Asia excluding China as demand for electric vehicles is expected to surge in India and Southeast Asia. Tesla produced 930,000 units in 2021 and announced that it will produce 20 million units in 2030. It aims to dominate the global electric vehicle market through economies of scale. For this reason, India, Indonesia, and Japan have been mentioned as strong candidates for a new Gigafactory. In this regard, it is significant that Musk selected Korea as one of the top investment candidates along with them.
If Tesla picks Korea as the site for a new Gigafactory, the Korean auto industry ecosystem is expected to go through a tectonic shift. There are five car companies in Korea, but Hyundai Motor Group is taking the lion’s share. The nation's auto industry ecosystem is built around Hyundai Motor Group. If Tesla, the world’s largest electric car company, enters Korea, another axis will be created within the industry.
Korea's strengths as a production base include the large growth potential of the domestic market, a solid parts supply network, and a global FTA network. Tesla sold 17,789 units in Korea last year and 13,038 units by October this year. Recently, global manufacturing companies changed the past trend of exporting products made in low-wage countries.
Korea's another advantage is that it has global battery giants such as LG Energy Solution, Samsung SDI, and SK On, and a top-level parts supply network. Some analysts say that General Motors (GM) is maintaining a factory in Korea despite endless labor-management conflicts in Korea because it understands the advantages of this parts supply chain in Korea.
Korea also has FTAs with about 80 countries, which maximizes Korea’s value as an export base. By using FTAs, companies in Korea can flexibly respond to demand from the United, Europe, Central and South America, etc.
However, some industry insiders note that demand for Tesla cars in Korea is not big enough to build a Gigafactory, and even considering exports, building a factory in Southeast Asia may be more beneficial for Tesla. They say that Musk might have paid lip service to appeal to Korean consumers.
“Korea has excellent technology, but the job market is rigid and there are risks such as radical labor unions,” said Lee Ho-keun, a professor at Daedeok University’s Department of Automotive Engineering. “Considering Musk's actions in the process of acquiring Twitter, we need to refrain from having too much anticipation.”