Potentially Threatening Domestic Industry
The large-scale imports of Chinese-made vehicles and batteries is expected to have a significant impact on the domestic car market and parts industry in Korea. The increase in Chinese imports can be attributed to competitive pricing, driven in part by rising raw material costs.
Experts argue that while it may be challenging for government regulations to curb the import of Chinese cars and batteries, domestic car manufacturers and parts suppliers should strengthen their competitiveness.
According to industry sources on Sept. 12, the brands currently importing cars from China include Volvo, BMW, and Tesla.
Volvo had previously imported its mid-sized S90 sedan from China. However, due to the increased demand for its mid-sized XC60 SUV, it decided to import its Chinese production until March next year. Volvo Korea said, “We give customers the option to choose between Chinese and Swedish models due to potential concerns over Chinese-made vehicles.” The all-electric brand of Volvo, Polestar, is also importing its Polestar 2 from China.
BMW’s currently sold iX3 mid-sized SUV is entirely Chinese-made, and Mini also plans to bring in its upcoming all-electric New Mini Cooper SE from China next year.
Tesla’s Model Y, which has restarted its sales in Korea, is imported from China, and its Model 3 will also be replaced with Chinese production in the future. The reason for the increase in Chinese-made vehicles is the manufacturing cost savings of around 20% compared to those produced in countries like Sweden (Volvo and Polestar 2), Germany (BMW), and the U.S. (Tesla).
For instance, Tesla’s Model Y originally priced its all-wheel-drive long-range model at 78.74 million won and its all-wheel-drive performance model even higher at 85.34 million won. However, the Chinese version, while being a rear-wheel-drive model, is around 20 million won cheaper. The Chinese-made Volvo XC60 is also about 500,000 won cheaper than its Swedish counterpart.
If these multinational luxury vehicles continue to enter Korea at relatively lower prices, it might affect domestic car sales.
Electric car batteries from China are also becoming the norm. Currently, domestically produced electric cars such as Hyundai’s Kona Electric, Kia’s Niro EV and the upcoming Ray EV, KG Mobility’s Torres EVX, and imported electric cars like Tesla’s Model Y RWD, Mercedes-Benz’s EQE and EQS, a part of BMW’s iX3, and Mini’s Mini Electric all use Chinese-made batteries.
While luxury electric cars like BMW and Benz utilize nickel-cobalt-manganese (NCM) lithium-ion batteries, more affordable electric cars tend to use the slightly inferior Lithium Iron Phosphate (LFP) batteries.
The soon-to-be-released Ray EV, Model Y RWD, and Torres EVX will each feature LFP batteries from Chinese manufacturers CATL and BYD. Hyundai’s upcoming Casper Electric (tentative name) will also be equipped with CATL’s LFP battery.
Although LFP batteries have a lower energy density, their structure is stable, reducing the risk of fires, and they are made from abundant materials, making them cost-effective. Recently, advancements have been made in developing LFP batteries with higher energy density. Typically, higher energy density translates to longer driving ranges for electric vehicles. However, with the expansion of Chinese batteries, the position of the domestic battery component industry is expected to become precarious.