[Inside Chodong] A Few Puzzle Pieces to Fulfill the President's Request

Despite Efforts to Attract a Tesla Factory,
Expectations for Final Selection Remain Low
Securing Battery Supply Chains Must Come First

President Yoon Suk-yeol met with Elon Musk, CEO of Tesla, last April to urge the company to establish a factory in South Korea. Earlier, in November last year, the two held a video conference to discuss investment plans in Korea. Several locations besides South Korea have been mentioned as potential new electric vehicle production bases for Tesla. These include Mexico, adjacent to Tesla's U.S. headquarters, India, which has emerged as the world's largest market, and Spain, a major automotive power in Europe. Although Musk referred to Korea as "one of the top priority candidates," few expect it to be the final choice.

The reason Tesla's decision draws attention is that it is the world's largest electric vehicle manufacturer and is regarded as an icon of future mobility, including electrification and autonomous driving. While there are many companies with longer histories and higher production volumes, Tesla's market valuation is already the highest among global automakers. The company currently produces about 2 million vehicles annually and has declared plans to increase this to 20 million by 2030. In addition to its existing factories in the U.S., China, and Germany, it needs to build more new plants.

The curiosity centers on two main questions. Will Tesla build a factory in Korea? Before that, there needs to be a shared understanding of why building an electric vehicle factory is necessary. The value chains intertwined in the complete vehicle manufacturing process represent not only jobs but also a significant pillar of the economy. The similar lists of major economic powers and automotive manufacturing giants?including the 'G2' U.S. and China, as well as Japan and Germany?reflect this reality.

Moreover, as future mobility develops, expanding from electrification to software-based service areas, having manufacturing bases has become even more important. The trade conflicts between the U.S. and China over technological supremacy, unpredictable natural disasters like COVID-19, and variables such as the Russia-Ukraine war have shown that supply chains can collapse instantly. This has revealed that free and reciprocal trade is often just rhetoric.

Mexico, confirmed as the new factory location, was initially considered a strong candidate. It can cover not only the largest North American market but also Central and South America. Utilizing existing supply chains and exporting to neighboring countries is also convenient. India has recently gained momentum. Although discussions about investment were held last year, they reportedly failed due to disagreements over tariffs. The previously stalled Tesla India factory project resurfaced when Prime Minister Narendra Modi visited the U.S. and met with CEO Musk, who complimented Modi by calling him a 'fan.'

Earlier, in May this year, a Tesla executive responsible for the supply chain visited India to discuss electric vehicle and battery factories with local government officials. It is a natural move to secure a well-established supply chain. What sets Tesla apart from traditional legacy automakers is its proactive approach to battery internalization, unlike the usual vertical integration.

The reason Musk is seen as unlikely to choose Korea, a battery powerhouse, is that domestic companies already face battery supply shortages to the extent that they cannot fully secure their own supply. Hyundai Motor Group imports a significant portion of its batteries from China due to a lack of domestic supply. Even the French automaker Renault's headquarters is delaying final decisions on producing electric vehicles in Korea because it cannot secure battery suppliers. While honing technology is important, we are well aware that enriching the manufacturing ecosystem is equally crucial.