The Korean Confederation of Trade Unions, the Federation of Korean Trade Unions, and the Korea Automobile & Mobility Association have jointly petitioned the government and the National Assembly to introduce a domestic production promotion tax system for electric vehicles. It is highly unusual and encouraging for labor and management to jointly consider survival measures and speak with one voice to the ruling party and the government. The current situation is alarming, as the indiscriminate onslaught of Chinese EVs — armed with cost-effectiveness and technological prowess — is shaking Korea's EV ecosystem. The government has officially included the introduction of a domestic production promotion tax system in this year's tax law revision bill.
The onslaught of "Made in China" EVs on the Korean market is intensifying by the day. Of the 220,177 EVs newly registered in Korea last year, 74,728 were Chinese-made, accounting for 34% of the total. That means roughly one in every three new EVs. In particular, the Tesla Model Y manufactured in China sold 50,495 units, surpassing the EVs of Hyundai Motor (005380.KS) and Kia (000270.KS) to take the top spot in domestic EV sales. By contrast, the market share of domestic companies' EVs, which stood at 75% in 2020, has sharply fallen to 57.2%. The humiliation suffered by Japan's Honda — which entered Korea in 2004 and once topped imported car sales but fell behind in responding to EVs and was forced to withdraw from the Korean market — is not unrelated to China's EV rise.
EVs, a cutting-edge industry, have long since become a "national contest." While individual companies' strategies and investments in the transition from internal combustion engine vehicles to EVs are important, they cannot survive fierce competition without the government's will to nurture the industry and comprehensive support. China's unprecedented rise to the top of global new car sales last year, led by EVs, was made possible by the Chinese government's all-out material and moral support. Major countries including the United States, Japan, and the European Union (EU) are also sharply reducing benefits for imported EVs while concentrating their efforts on supporting domestic companies through tax credits, financial support, and expanded purchase subsidies.
Automobiles are a core industry accounting for 10% of Korea's exports. If the transition to EVs is delayed, not only will the automotive ecosystem, including parts suppliers, be shaken, but employment, exports, and growth rates will inevitably take a hit. The ruling party and the government should reflect the cases of major competing nations and actively accept the EV competitiveness enhancement measures requested by automotive labor and management. Like the U.S. Inflation Reduction Act (IRA), which combines a domestic production promotion tax system with industrial subsidies as a package, Korea must also implement without hesitation a restructuring of EV subsidies, support for parts suppliers' electrification, and expansion of charging infrastructure.
