"The automobile industry is not a competition between companies but between nations. If Korea alone fails to provide the production incentives that major countries like China, India, and the United States offer, leadership in the domestic electric vehicle market could be handed over to China."
Chung Dae-jin, Chairman of the Korea Automobile & Mobility Association (KAMA), stated this during an exclusive interview with Seoul Economic Daily held at the Automobile Center in Seocho-gu, Seoul on the 20th, saying, "If the domestic market begins to be taken over by Chinese cars, the very roots will be shaken." This is Chairman Chung's first media interview since taking office last month. He passed the 37th administrative examination and held various government positions in industrial policy and investment attraction, including as Deputy Minister for Trade at the Ministry of Trade, Industry and Energy.
Chairman Chung emphasized that the automobile industry must be included in the Domestic Production Promotion Tax System in order to protect the domestic auto market. The Domestic Production Promotion Tax System provides incentives such as tax credits in proportion to the volume of products produced and sold domestically. It aims to revitalize the industrial ecosystem and regional economy by encouraging companies to maintain and expand their production bases in Korea.
Chairman Chung emphasized tax support because Chinese EVs, which have received hundreds of trillions of won in government subsidies, are rapidly encroaching on the Korean market. Citing findings from the U.S. think tank Center for Strategic and International Studies (CSIS), Chairman Chung said, "China has provided 340 trillion won in subsidies to EV companies over 15 years, and the European Union (EU) also cited subsidies accounting for up to 35% of Chinese EV prices as grounds for imposing countervailing duties." He expressed concern, adding, "China has already secured a sufficient domestic market through subsidy policies and achieved economies of scale, and is now exporting remaining inventory overseas."
In fact, the share of Chinese-made EVs in the Korean market has increased nearly sevenfold in just three years, from 4.7% in 2022 to 33.9% last year. This contrasts with the share of domestically produced EVs declining from 75% to 57.2% over the same period. Chairman Chung said, "If we leave this as it is, the market share could be reversed at any time," adding, "Rather than introducing support measures when the crisis becomes reality, preemptive support through the Domestic Production Promotion Tax System must be provided in preparation for industrial damage that will arrive in the near future."
Chairman Chung explained that the Domestic Production Promotion Tax System is not a policy that gives preferential treatment to a few large companies such as automakers. He said, "The automobile industry is a miniature version of our economy. Behind automakers are 30,000 parts suppliers and over 1.5 million total workers, so automobile production incentives will play a role in sustaining this ecosystem."
Regarding the government's EV distribution roadmap, Chairman Chung believes more sophisticated policy implementation is needed. In accordance with the "Carbon Neutrality Green Growth National Strategy," the government is providing not only national subsidies but also purchase subsidies from local governments, aiming to distribute 4.2 million EVs by 2030.
He said, "We must be able to simultaneously satisfy both policy goals: expanding EV distribution and strengthening the domestic EV industry ecosystem," adding, "We must be particularly careful that EV purchase subsidies do not lead to a flood of imported vehicles in the domestic market." Currently, EV purchase subsidies are paid regardless of the country of EV production, but support for foreign EVs from countries like China should be handled more meticulously.
To promote EV adoption, Chairman Chung proposed measures such as a system separating ownership of the EV and battery, and expanded highway toll discounts. Regarding battery ownership in particular, he explained, "Since batteries account for 40% of an EV, separating ownership of the vehicle and battery improves accessibility to EVs," and added, "It could also create a new market for battery leasing."
Mentioning that geopolitical tensions are rising due to the U.S.-Iran war and cracks are appearing in the global supply chain, Chairman Chung suggested, "Even if costs increase, efforts to diversify the supply chain must be made." Chairman Chung said, "The era of peaceful and free exports after World War II is now over," adding, "Some country or company could weaponize mutual dependency to make threats, so Korea also needs to have weapons." He pointed out, "We need to move away from 'Just-in-Time,' which brings in only what is needed when it is needed, and shift toward 'Just-in-Case,' which secures multiple suppliers even if costs increase."
Regarding the "Yellow Envelope Act," which allows subcontractor unions to negotiate directly with prime contractors, Chairman Chung believes the criteria for determining employer status must be clear. Chairman Chung emphasized, "While I sympathize with the legislative intent, the interpretation guidelines and negotiation manuals are abstract, leaving many unclear aspects such as the scope of employers and the expansion of negotiation agendas," adding, "In particular, supplementary measures such as deleting criminal punishment provisions for unfair labor practices such as refusing to negotiate must be implemented."
