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President Yoon Suk-yeol and Hyundai Motor Chairperson Chung Eui-sun walk through a port filled with Hyundai cars for export on April 9. (presidential office pool photo)

Automobiles are turning into the main driver of South Korean exports as they make up for poor exports of semiconductors.

Last month, South Korea’s auto exports reached a historic monthly high of US$6.5 billion. This reflects the global market’s recognition of the competitiveness of South Korea’s automobile companies, especially in terms of electric vehicles (EVs) and other eco-friendly vehicles.

But it remains uncertain whether the trend will continue as changes hit the EV market, which accounts for a growing proportion of exports.

An examination of a Ministry of Trade, Industry and Energy report published Sunday on March automobile industry trends showed 409,806 automobiles produced last month, up by 35.6% from the same month in 2022. It was the first time in six years since March 2017 that South Korea’s monthly automobile production topped 400,000 vehicles.

The biggest contributor to the rise in production was a boost in exports. Last month, South Korea exported 262,341 automobiles, an increase of 48.0% from the same month last year. At US$6.518 billion, the dollar value of exports rose by 64.1% compared with March 2022.

In terms of export volume, this was the highest level since December 2016, when 298,000 automobiles were exported. In terms of export value, it was a record high for a second straight month.

“The export boom has been driven by electric vehicles and other eco-friendly vehicles, which carry high export unit prices, as exports have surpassed 70,000 vehicles for the first time,” the ministry explained.

Indeed, the proportion of EVs and other eco-friendly vehicles out of all passenger automobile exports rose from 23.9% in 2022 to 27.3% as of March 2023. A total of 71,781 eco-friendly automobiles were exported, up by 79.5% from the same month last year, while their dollar value nearly doubled to reach US$2.27 billion.

According to figures shared by Hyundai and Kia, the two companies sold a combined total of 135,499 EVs on the global market between January and March 2023, for an increase of 76.4% from the same period in 2022. When South Korean sales were subtracted, the total of 104,517 vehicles sold overseas was up by 93.4% from the first quarter of last year.

But questions remain over whether this pace of growth can be sustained — especially with signs of competition heating up in the market for EVs and other eco-friendly automobiles.

Recent reports in the foreign press indicate that the US EV company Tesla is lowering prices by 5% to 10% for its models sold in Europe, Singapore, and other locations. This means the world’s No. 1 EV maker is adopting an aggressive strategy to beef up its market share by reducing prices.

The German automaker Volkswagen has also shared targets that include coming out with EVs costing no more than US$25,000 this year.

Industry competition is intensifying with this shift in the EV market toward more affordable mass-market automobiles. A key question is what choices consumers make as the US — which represents one of the biggest automobile markets — implements policies providing tax credits for locally produced vehicles.

Chinese EV makers are another focus of attention as they speed up their efforts to expand into the global market.

BYD, China’s biggest EV company, announced in September 2022 that it planned to build its first overseas production base in Thailand. China exported 680,000 EVs last year.

“China had not previously been competing with South Korean vehicles, since it exports primarily to developing countries, but recently it has been expanding significantly with EVs in the European market,” explained Cho Chul, a senior research fellow at the Korea Institute for Industrial Economics and Trade.

“It’s a threatening situation when [Chinese automakers] are competing directly with Korean vehicles,” he warned.

At the same time, he observed that EVs still represent a small portion of the US market, highlighting “ample growth potential.”

“It is important that South Korean automakers don’t let go of their current position in the EV export competition,” he said.

Lee Seo-hyeon, a senior research fellow at the Korea Automotive Technology Institute, said, “Future changes in US and European EV policies are other variables we’re going to need to watch closely.”

“In addition, there is going to be more of a focus on traditional competitiveness elements like production cost-cutting and supply chain management [as EV technology increasingly matures],” Lee predicted.

By Choi Woo-ri, staff reporter; Kim Hoe-seung, senior staff writer

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