Wars have always altered the course of the global economy. The oil shocks of the 1970s spurred energy conservation and fuel efficiency competition, while the Russia-Ukraine conflict has shaken Europe's energy security strategies. The recent prolonged violence in the Middle East is creating yet another inflection point. International oil prices fluctuate dramatically whenever geopolitical risks rise, and instability in oil supply chains, including the Strait of Hormuz, has become a constant concern. The immediate impact is rising oil prices, but the more significant change is the global industry's movement away from fossil fuel dependence.
The transition to electric vehicles (EVs) should also be viewed through this lens. Until now, the adoption of EVs has been driven primarily by carbon neutrality policies and environmental regulations. In the future, energy security is likely to become an even more critical motivator. Countries that heavily rely on oil imports will have no choice but to accelerate electrification to mitigate the shocks from oil price fluctuations and supply chain disruptions. We are entering an era where energy security and industrial competitiveness are intertwined challenges.
China stands to benefit the most from this shift. Just over a decade ago, Chinese electric vehicles were often seen as cheap, low-quality products. That perception has changed. China has effectively built a domestic-centric supply chain for EVs, encompassing batteries, rare earth elements, motors, power semiconductors, and software. The world's largest battery manufacturer, CATL, leads the global market in both technology and production capacity. BYD has grown to become the largest seller of electric and plug-in hybrid vehicles worldwide.
The combination of long-term industrial support from the Chinese government and a vast domestic market has allowed China to achieve economies of scale. Recently, it has also been recognized as a competitor to the U.S. in the smart car sector, integrating artificial intelligence (AI) technology. This is why global automakers are expanding collaborations with local companies to target the Chinese market.
In contrast, European automakers are restructuring due to declining EV demand and rising costs, while Japanese companies are also reassessing their investment strategies. The U.S. is focusing on protecting its domestic industry through tariffs and subsidies, but it struggles to compete with China's price competitiveness. If energy instability from the Middle East persists, the gap is likely to widen further.
South Korea cannot afford to be complacent. Hyundai Motor Group finds it challenging to assert a competitive advantage over China in the fields of electric vehicles, batteries, and software-defined vehicles (SDVs). As the global market's center of gravity shifts, relying on past success formulas will not ensure sustainable growth.
It is essential to view electric vehicles not merely as a segment of the automotive industry but as a national strategic industry that combines energy security and AI. There is a pressing need to develop the entire supply chain, including next-generation batteries, power semiconductors, vehicle AI chips, autonomous driving software, and charging infrastructure. In particular, efforts to extend the manufacturing competitiveness gained in semiconductors and batteries to AI-based mobility are crucial.
We must clearly distinguish between areas of competition and collaboration with China, the world's largest EV market and supply chain hub. Practical cooperation should be sought in battery materials, critical minerals, charging infrastructure, and autonomous driving technology. As the global industry undergoes a reorganization centered around supply chains, relying solely on ideological divides will not secure a foothold in future markets.
The conflict in the Middle East is shaking international oil prices, but its repercussions extend beyond the energy market, reshaping the future of the automotive industry. The uncertainties of the oil era are acting as a catalyst for the acceleration of the electric vehicle era. If South Korea can leverage its manufacturing prowess to secure competitiveness against China, it could confidently enter the competition for leadership in the future mobility market.
* This article has been translated by AI.
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