[Inside Chodong] Electric Vehicles Flowing Out of China, While the US and Europe Raise Barriers...

China Launches Offensive with High-End, Value-Added Vehicles
Additional Tariffs Announced, but Korea Remains Complacent

Last month, around 400,000 new energy vehicles were sold in China. This figure includes battery electric vehicles, plug-in hybrids, and hydrogen cars, and is half the nearly 1 million units sold monthly around the end of last year. News of fewer car sales in neighboring China cannot simply be dismissed as distant foreign news. It signals that the time for this trend to reach our land has accelerated accordingly.

In recent years, China has steadily increased its exports of finished vehicles not only to neighboring Russia and Asian countries but also to Europe, Latin America, and other parts of the world. Although the United States appears to oppose China outwardly while competing for superpower status, it has long been a major importer of Chinese cars. Until 2020, China’s vehicle exports were less than 1 million units. Since then, the electric vehicle boom has rapidly increased exports, surpassing 2 million units in 2021 and 3 million units the following year. Last year, production across China exceeded 30 million units, with nearly 5 million sold overseas. China is indisputably the world’s number one in automobile production, sales, and exports.

Chinese local electric vehicle manufacturers have been focusing on overseas expansion for several years. BYD, which competes with Tesla for the top global spot, recently unveiled eight new models at the Geneva International Motor Show. Notably, high-end models such as the premium brand Yangwang’s off-road sport utility vehicle (SUV) U8, Denza’s multipurpose vehicle D9, and SUV N7 attracted attention. These are expensive cars priced between 100 million and 200 million KRW per unit. Rather than simply competing on price as Chinese products, they aim to target the “home ground” of Europe with high-quality, premium vehicles.

At the Tokyo Mobility Show held last year, BYD also showcased a large number of mass-produced electric vehicles ready for immediate sale, drawing the most interest from both the press and general visitors. Xiaopeng, considered a startup, recently partnered with local dealers in the United Arab Emirates (UAE), Egypt, and Azerbaijan. It plans to enter Germany, the United Kingdom, Italy, and France?the heart of the European automotive market?within this year.

The Chinese government has also rolled up its sleeves. Led by the Ministry of Commerce, related departments have decided to simplify customs procedures for new energy vehicles and batteries. They have increased the scale of yuan-denominated payments instead of dollars and included electric vehicle companies in pilot trade and investment projects. China plans to raise its voice in the process of establishing international standards related to maritime transport of electric vehicles and batteries. It is also researching technology to transport batteries by rail and has implemented meticulous support measures such as allowing shipping companies with logistics bases overseas and electric vehicle companies to share warehouses. With domestic consumption slowing and profitability declining mainly among small and medium-sized enterprises, China has clearly sought to find new opportunities through exports.

In the United States and Europe, walls are being hastily erected in response to China’s offensive. The Inflation Reduction Act (IRA) and the Carbon Border Adjustment Mechanism are justified as measures to address climate change, but their true intent is largely to impose penalties on Chinese products. Perhaps considering these measures insufficiently effective, more direct policies targeting China are expected soon.

In Europe, the Chinese government’s subsidies to electric vehicle companies have been declared illegal, with additional tariffs announced. The United States cites concerns over potential information leaks through connected cars. These are economic security arguments that generally hold sway. Voices in the U.S. Congress even call for sharply increased tariffs specifically targeting Chinese companies. Meanwhile, apart from the difficult revision of subsidy systems, no clear countermeasures are visible on our side. Is it because we do not want to provoke a trade dispute with China, or because we believe our automobile companies will handle the situation well on their own? This time, we can only hope that Murphy’s Law will not apply.

Choi Dae-yeol, Deputy Head of the Industrial IT Department