[Inside Chodong] Cracks Appear in the Decoupling from China in the Future Vehicle Market

The European Union (EU) is scheduled to hold a vote among member states this week regarding tariffs to be imposed on Chinese electric vehicles. Originally, a vote was planned last week to finalize high tariffs, but the final decision was postponed as additional negotiations with China took place. While it is difficult to predict the outcome, the initially bold move to reject Chinese electric vehicles has weakened. Germany, the economic powerhouse of Europe, openly opposed high tariffs citing trade retaliation concerns. Chinese cars like Volkswagen, which are already struggling with sales in China, may face backlash locally. Spain and Italy are in similar situations. France, which has a strong voice in the EU, has traditionally maintained close ties with China.

Few expected the decoupling movement from the Chinese electric vehicle ecosystem, led by the United States, to succeed initially. The anti-China coalition was loose from the start. The battery supply chain, considered a core component of electric vehicles, is overwhelmingly dependent on China. It is nearly impossible to replace supply sources for the early stages of battery production, such as raw material extraction and processing, with other countries, and the market share of finished batteries from China is also dominant. To meet increasingly stringent emissions regulations, the transition to electric vehicles must accelerate, and achieving this without affordable Chinese electric vehicles is practically impossible.

It is currently reasonable to conclude that China has taken the lead in the future vehicle market, including electric vehicles. This is not just due to a large domestic market and patriotic consumption driving growth. Baidu’s autonomous vehicle Apollo Go, which is said to have the most advanced artificial intelligence (AI) technology in China, operates a large-scale fleet of unmanned taxis in Beijing and Wuhan, Hubei Province. As of April this year, the cumulative number of service trips reportedly exceeds that of Waymo, operated by Google, by about four times. Tesla also worked hard to obtain permits for autonomous driving pilot operations in China. The key factors determining success in autonomous driving are the amount of data collected by individual companies and the extent to which authorities support infrastructure and legal/administrative systems.

On the 12th, the exhibition hall of Chinese electric vehicle company BYD at the Automechanika event held in Frankfurt, Germany
[Photo by Yonhap News, Xinhua News Agency]

Global automakers have also changed their perspectives on China. Hyundai Motor’s Advanced Digital Research Institute in China, established three years ago, is responsible for researching local technology and product demand. Whereas in the past, technologies developed at headquarters were sent to Chinese factories for production, now they investigate the heightened local demand and develop accordingly, then apply these developments overseas. The extended-range electric vehicle (EREV) that Hyundai is actively developing is a field they entered late after seeing demand in the Chinese market.

Unlike the U.S. government’s rhetoric of “defeating China,” General Motors (GM) and Ford do not hide their intentions to adopt Chinese battery technology. Stellantis, which includes Chrysler, one of the former U.S. Big Three, has even formed a joint venture with Chinese electric vehicle company Lingpao. It has long been common for companies with Chinese-majority shareholders, such as Mercedes-Benz and Volvo, to actively utilize supply chains within China.

Although the U.S. has imposed high tariffs on Chinese cars and regulations to prevent the use of Chinese parts, most recognize these measures as stopgap solutions. The intention is likely to buy time for domestic automakers rather than solve the problem. Even this is showing signs of fading as cracks appear in the anti-China coalition. Although there has been some hesitation compared to the past, the automotive industries of Korea and China remain closely intertwined. We hope for a constructive competitive environment rather than hostile confrontation.