As major countries raise trade barriers in response to the global market push by Chinese automakers, South Korea's automotive industry is facing warning signs for its exports. The European Union (EU) is considering emergency import restrictions (safeguards) targeting Chinese hybrid vehicles, which could also affect South Korean exports. The competition for future vehicles centered on software and autonomous driving is intensifying, putting the government's trade response and industrial competitiveness policies to the test.
According to the Ministry of Trade, Industry and Energy, South Korea's automobile exports amounted to $60.5 billion last month, a 5.5% decrease compared to the same month last year. While the number of new car exports increased by 4.1%, the ongoing conflict in the Middle East and stricter regulations in major countries have impacted used car exports. Exports to North America and the EU rose by 9.2% and 15.3%, respectively, but exports to Asia and the Middle East fell by 60.0% and 7.1%.
New trade barriers in Europe have emerged as a variable for exports. According to Reuters, the EU Commission plans to implement safeguards on hybrid vehicles as early as early December. The import limit for Chinese hybrid vehicles is set at 350,000 units annually, which is less than half of the expected import volume of 800,000 units this year. This import limit will be in effect for four years, with a planned annual increase of 6%.
The key issue is the scope of application and quota size for South Korean vehicles. Safeguards are generally applied regardless of the origin of imported goods, meaning that quotas could be assigned to other exporting countries, including South Korea.
If quotas are established for South Korean vehicles, it could restrict the expansion of exports of domestically produced vehicles, even as demand for eco-friendly cars in Europe increases. While a decrease in Chinese vehicle imports may present opportunities for competitors, the actual impact will likely depend on the types of vehicles affected and the quotas assigned to each country.
The government plans to develop a negotiation strategy to secure quotas for South Korean vehicles. An official from the Ministry of Industry stated, "Nothing has been decided regarding South Korea yet, and it is time to create a negotiation strategy to secure more quotas."
Additionally, enhancing the competitiveness of future vehicle technologies has emerged as a critical task. A report from Deloitte Korea indicates that the automotive industry is undergoing a transformation beyond vehicle manufacturing, integrating software-defined vehicles (SDVs), autonomous driving, and robotics.
In response to these changes, Hyundai Motor is collaborating with NVIDIA. The company plans to apply Level 2+ technology to its first SDV mass production model in 2028 and enhance its autonomous driving artificial intelligence (AI) based on real driving data.
The government is also supporting the commercialization of future vehicle technologies and supply chain independence. At the end of last month, the Ministry of Industry signed agreements involving automakers, parts suppliers, semiconductor manufacturers, and autonomous driving companies. Ongoing projects include research and development of SDV and AI solutions for mid-sized automakers transitioning to future vehicles, as well as the establishment of verification equipment for vehicle semiconductors, with additional projects planned to start next year.
Concerns have been raised about the weakening of domestic production bases due to localization efforts abroad. Kim Pil-soo, a chair professor at Daelim University’s Future Automotive Department, emphasized, "Domestic production facilities are essential for job creation and revitalizing the parts industry. We need to strike a balance between overseas local production and maintaining domestic production to respond to protectionist policies."
* This article has been translated by AI.
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