Representative organizations of the automotive industries in Korea and Europe shared the view that the pace of the transition to the electric vehicle era needs to be adjusted.

The Korea Automobile Manufacturers Association (hereinafter KAMA) held a regular consultation with the European Automobile Manufacturers Association (ACEA) in Brussels, Belgium on the 10th (local time).

Representing the Korean side were Chairman Jung Man-ki and officials in charge of international trade and industrial analysis, while ACEA was attended by Secretary General Eric Marc Huitema and representatives in charge of international trade, greenhouse gas policy, and emissions. They discussed various issues, including industrial trends, carbon emission regulations, global supply chain issues, and the impact of the Russia-U.S. conflict on the industry.

Both sides first shared the recent status of the automotive market and industry conditions.

With both the European and Korean automotive industries failing to recover to pre-pandemic levels due to the resurgence of COVID-19 and semiconductor supply shortages, coupled with the war between Russia and the U.S., automobile sales in the first quarter of this year fell by 12.3% in the EU and 12.8% in Korea, showing weaker performance than in 2020.

In addition, they shared the view that the high dependence on Russia and Ukraine for automotive parts procurement is a factor hindering the recovery of the automotive industry.

While the European side emphasized that "the entire industry is facing difficulties due to disruptions in automobile production caused by a shortage of Ukrainian wiring harnesses, as well as the suspension of imports of Russian materials, parts, and energy," Korea stated that "it is facing financial difficulties resulting from the suspension of local factories of finished car manufacturers and 14 parts suppliers."

Meanwhile, regarding the results of KAMA’s 2021 survey on the automotive industry’s response to the transition to future vehicles, which included a shortage of skilled personnel, insufficient preparation by parts suppliers, and poor profit realization, ACEA expressed agreement, stating, “EU companies are also facing the same problems,” and adding, “In particular, workforce restructuring and securing skilled personnel are important issues.”

Regarding EU environmental regulations, ACEA expressed concern, stating, “Although the EU is pushing for strong regulatory tightening, the effects of introducing regulations are insufficient, which could only lead to the automotive industry becoming more dependent on specific technologies such as electric vehicles.”

There was also a similar tendency for demand to concentrate on luxury vehicles such as electric cars and SUVs, and electrification expanded rapidly in both sides, with the market share of electric vehicles recording 37.6% in the EU and 20.1% in Korea in 2021.

It was further pointed out, “The EU Commission is pushing for stricter regulations, such as setting standards for phasing out internal combustion engines by 2035, but incentives such as expanding charging stations and setting reasonable energy tax rates are lacking. In the case of setting EURO 7 standards, while the need for companies to expand investment compared to EURO 6 has increased, the resulting reduction in air pollutants is not significant, so the practical benefits of introducing regulations are not great.”

KAMA emphasized, “In the case of Korea, while it is necessary to strengthen existing fuel efficiency and greenhouse gas regulations following the announcement of the new 2030 NDC, regulations are expected to be reasonably relaxed considering the new government’s rationality and pro-business tendencies,” adding, “Fuel efficiency and greenhouse gas regulations and the mandatory electric vehicle sales system are overlapping regulations, so one of the two regulations must be abolished or the regulatory penalty must be reasonably adjusted considering the effect of the total amount of regulation.”

He continued, “The Korean industry is facing issues with parts supply and production disruptions due to a shortage of raw materials,” and expressed concern, noting, “China monopolizes most key raw materials for electric vehicles, accounting for 58% of global processed lithium production and 35% of nickel production, while Korea has a high dependence on China for raw materials, including 35% for rare earths and 88% for materials and components. Therefore, if the prices of parts or raw materials rise in the era of electric vehicles, the industry could face a crisis.”

In response, ACEA expressed agreement and suggested that "a joint response regarding the supply chain in the electric vehicle era is necessary."

Both sides agreed on the need to control the pace of the transition to the electric vehicle era and maintain technological neutrality between electric power and internal combustion engine technologies regarding automotive power sources such as biofuels, e-fuels, hydrogen vehicles, and electric vehicles, and stated that they would jointly propose these views to both governments.