"Thank You US IRA" Asia and Europe Car Exports Increase This Year... South Korea Up 36%

Effect of US Electric Vehicle Subsidy Benefits
"Risk of Decreased Automobile Exports Next Year"

Car exports from Asia and Europe, including South Korea, have significantly increased this year, boosted by electric vehicle subsidies under the U.S. Inflation Reduction Act (IRA).

On the 19th (local time), The Wall Street Journal (WSJ), citing data from the German Association of the Automotive Industry, reported that Germany's passenger car exports totaled 2.6 million units from January to October this year, a 22% increase compared to the same period last year.

According to data compiled by Oxford Economics, car exports in the Asian region also saw substantial growth. China's car exports in the third quarter of this year increased by 71% compared to the monthly average in 2021. South Korea's exports rose by 36% during the same period, while Japan and Thailand saw increases of 18% and 13%, respectively. Considering that non-automotive exports from these four Asian countries decreased by 5.4% during the same period, it confirms that car exports performed well despite the global economic slowdown.

This trend is also reflected in South Korean government statistics. According to the "October 2023 Automotive Industry Trends" released by the Ministry of Trade, Industry and Energy, cumulative car exports from January to October this year amounted to $57.96 billion, a 33.9% increase compared to the same period last year. In terms of volume, 22.75 million units were sold, marking a 22% increase from one year ago.

The increase in car exports from these countries is attributed to the U.S. eco-friendly vehicle subsidy policy. Since August last year, the U.S. has implemented the IRA, which provides tax benefits of up to $7,500 for electric vehicles that are finally assembled in North America. The relaxation of IRA eligibility requirements for electric vehicles from South Korea and Japan has positively influenced exports by enabling these vehicles to receive tax incentives.

Additionally, U.S. car dealers significantly increasing vehicle orders has driven the rise in car exports. A Hyundai dealership in Fort Lauderdale, Florida, reported that its inventory increased from 30-40 units last year to about 400 units, returning to pre-COVID-19 levels.

However, with the cumulative tightening effects of the Federal Reserve (Fed), there are expectations that the U.S. economy may slow down next year, which could lead to a decrease in car exports.

Frederick Neumann, HSBC's Chief Economist for Asia, forecasted, "There is a risk that car export shipments from the Asian region will decline next year."