Korea is being urged to brace for an influx of Chinese electric vehicles (EVs), which are feared to increase their market share while potentially impacting the local environment, experts and industry officials said.

Data from the Korea International Trade Association (KITA) revealed that Chinese EV imports reached $848 million (1.12 trillion won) during the first seven months of this year, accounting for 66 percent of total imports of such cars. Of particular concern is the rapid growth, with imports surging more than eightfold compared to the same period last year.

This was driven by the popularity of the Model Y, a mid-sized electric SUV manufactured by Tesla’s Gigafactory in Shanghai, China. Tesla has also imported the Model 3 EV from China. Both vehicles have been hugely popular apparently due to their price competitiveness.

Chinese EVs are posing a significant threat to domestic EV makers in the commercial vehicle market. According to data from the Korea Automobile Manufacturers Association (KAMA), the share of Chinese electric buses exceeded 40 percent as of April 2023.

Experts and industry officials have emphasized the urgent need to create a fair competition environment for both Chinese and domestic carmakers.

Most Chinese EVs are equipped with lithium iron phosphate (LFP) batteries, which have a clear upside in terms of its price competitiveness. However, since LFP batteries cannot be recycled, experts are urging the government to impose additional costs on Chinese EVs equipped with these batteries.

“Korea’s regulatory authorities are urged to impose a type of environmental improvement cost on EVs with LFP batteries, and build an ecosystem for both local and imported EV makers to compete on an equal footing,” said Kim Pil-soo, an automotive technology professor at Daelim University College.

Fears of increased Chinese EV imports are escalating as BYD, the largest Chinese EV maker, is set to enter the Korean market in the latter half of 2024.

Additional data from KAMA indicated that the growing presence of Chinese EVs, both domestically and internationally, poses an increasing threat to Korean carmakers. Korean EV makers’ share of global sales dropped to 9.6 percent in the first half of this year, a decline of 0.8 percentage point, as Chinese firms rapidly expand their footprints abroad.

Industry officials argue that Chinese EVs offer unmatched price competitiveness in the global market, prompting local automakers to focus on strengthening their supply chains and improving their production methods.

“One key downside of EVs is their relatively higher price range than conventional vehicles with internal combustion engines,” an official at a carmaker said.

“It appears to be very difficult for local carmakers to gain more price competitiveness than Chinese EVs for the time being, so they will have to focus more on making their production more efficient to reduce unnecessary fixed costs and gain more advantages in terms of flexible production than their Chinese counterparts."