[C-Shock: K-Industries on the Brink | Auto] 1) China’s Auto Exports Enter the 12 Million Era... South Korean Exports and Domestic Market Under Pressure at the Same Time

Share of Total Vehicle Imports Nears 50%
Imports Top 100,000 for the First Time
Global Price Competition Could Hurt Domestic Automakers
Pressure on Export Profitability and Market Share

Editor's NoteChina's industrial offensive is eroding the markets of South Korea's key industries. The auto industry is already at the center of a China-driven shock. China's auto exports are expected to surpass 12 million vehicles this year, while South Korea's imports of Chinese-made vehicles exceeded 120,000 through August. As the United States and Europe move to curb Chinese electric vehicles, concerns are also growing about a "balloon effect" in which Chinese vehicles shut out of those markets flood into South Korea. The shockwaves are not confined to the auto industry. In the bio and semiconductor sectors, too, China is shaking up the markets of Korean companies with its price competitiveness, large-scale production capacity and rapid technological catch-up. Through its "C-Shock: K-Industries on the Brink" series, The Asia Business Daily examines the impact that China's oversupply, technological advances and overseas expansion could have on South Korea's auto, bio and semiconductor industries.

China's auto exports are rapidly spreading beyond Russia and Latin America into developed markets such as Europe and Australia. A surge in vehicles backed by competitive prices and electrification technology is reshaping the competitive landscape of the established auto market.

On October 12, the China Passenger Car Association (CPCA) forecast that China's auto exports would reach about 12 million vehicles this year. According to China's General Administration of Customs, the country's auto exports totaled 7.45 million vehicles from January to August this year, up 51% from the same period last year. Exports in August alone also surpassed 1 million vehicles. That is about 44% higher than the 8.32 million vehicles exported in all of last year.

China's supply capacity in overseas auto markets is entering a new phase, observers say. Chinese automakers have until now grown primarily in the domestic market, but recently they have been expanding exports not only to emerging markets such as Russia and Latin America, but also to developed markets such as Europe and Australia. As they expand overseas sales networks on the strength of the price competitiveness and electrification technology developed through auto production, export volumes are also rising rapidly.

By destination, Russia received the most Chinese vehicles from January to August this year, at 638,224. Brazil followed with 480,403, then the United Kingdom with 365,672, Australia with 326,938, Belgium with 322,562, and Mexico with 320,844. The Philippines received 214,359 vehicles, Italy 209,258, the United Arab Emirates (UAE) 196,117, and Algeria 190,045. This indicates that Chinese auto exports are spreading beyond emerging markets such as Russia and Latin America into developed markets such as Europe and Australia.

The surge in Chinese auto exports is raising tensions across the global auto industry. In a recent interview, Ford Motor Company CEO Jim Farley said, "Chinese automakers are using Europe as an initial foothold and rapidly increasing their market share in various markets, including Australia and Mexico." He added, "The future of U.S. industry depends on how appropriately we navigate this issue by creating a level playing field."

Efforts by governments to counter the trend are also gaining momentum. Europe recently reached an agreement with China to halve imports of Chinese-made hybrid vehicles. The specific reduction has not been disclosed, but imports are expected to fall by around 400,000 to 500,000 vehicles a year. The United Kingdom is also considering imposing tariffs on Chinese vehicles. This comes as the European Union (EU) has identified the UK as a potential backdoor for Chinese auto exports to Europe and is calling for tariffs on Chinese electric vehicles. The UK did not join the EU in imposing tariffs on Chinese electric vehicles in 2024, and Chinese manufacturers now account for 16% of the UK's new-car market this year as a result.

The concern is that U.S. and European measures could place a burden on the South Korean market. The higher the barriers major markets impose on Chinese auto imports, the more likely Chinese companies are to redirect their excess supply to other markets. This has raised concerns that South Korea could become an alternative destination for Chinese vehicles, as China already expands its export markets by leveraging its price competitiveness and large-scale production capacity.

The influx of Chinese-made vehicles into South Korea is also rising rapidly. From January to August this year, South Korea imported 120,024 vehicles made in China, accounting for 44.5% of the 269,866 vehicles imported overall during the same period. This was up 85.2% from 64,814 vehicles in the same period last year. This is also the first year that imports of Chinese-made vehicles have exceeded 100,000.

South Korea's auto industry has limited room to respond. Hyundai Motor and Kia remain competitive in major markets such as the United States and Europe, but they cannot easily mount a volume-driven offensive by simultaneously offering low-cost electric vehicles, hybrids and internal combustion engine vehicles, as Chinese automakers do. If China's oversupply fuels global price competition, South Korean automakers will inevitably come under pressure on export profitability and market share.

An auto industry official said, "Many of the Chinese-made vehicles entering South Korea are vehicles from global brands manufactured at factories in China, as well as Chinese-brand vehicles, so this cannot be viewed solely as an expansion of Chinese brands." The official added, "With the downturn in China's domestic auto market continuing over the long term, the volume of vehicles coming from China could increase further."

This content was produced with the assistance of AI translation services.