▲ Kim Pil-soo, Professor, Department of Future Automotive Engineering, Daelim University

Rising Global Tariffs on Chinese EVs... Potential Counterproductive Effects for South Korea

China Raises Electric Vehicle Tariffs in US, Brazil, Turkey, and Others
“Fragments of Retaliatory Tariffs Could Hit Export-Oriented Korea”

The automotive sector is the most important target in the recent global market dominance battle.

The automotive sector, characterized by the convergence of future technologies, is expanding into the concept of mobility.

Moreover, the battle for dominance in areas included in future automobiles, such as batteries, electric vehicles, and system semiconductors, is becoming even more intense.

Amidst the recent economic conflict between the U.S. and China, the war for dominance in batteries and electric vehicles is becoming increasingly fierce.

China's electric vehicle industry, which started about 10 years ahead of other countries, already accounts for about 50% of the entire global market.

Of course, it can be said that this development was driven by various forces, such as the Chinese government's invisible illegal subsidies.

Taking this as a pretext, the West took issue with the price competitiveness of Chinese electric vehicles. A full-scale tariff war has begun.

Countries are grappling with the urgent concern that the logic of market competition will collapse if low-cost Chinese electric vehicles make a full-scale entry into the West.

The United States took the lead in further excluding Chinese electric vehicles.

Even though Chinese electric vehicles were already unable to enter the U.S. market due to tariffs of approximately 25%, it was decided to proceed with a 100% tariff and began the process of raising tariffs by about two to four times on a wider range of products, including solar panels and batteries.

There are signs that Chinese electric vehicles are shifting toward indirect strategies, such as exports to Mexico, rather than direct exports to the U.S., but the U.S. is still considering sanctions in response.

Currently, there is a growing number of Chinese companies seeking to enter the Korean electric vehicle market by directly selling finished electric vehicles or exporting parts in the form of SKD or CKD, and then utilizing some of our parts for assembly and inspection at domestic assembly plants to arm themselves with 'Made in Korea' products, thereby sharing profits and targeting the global market.

Of course, it is a strategy to utilize the most FTAs with global markets and the most optimal testbed market as a gateway, a kind of 'gateway'.

Brazil and Turkey have also already decided to impose higher tariffs on cars from China.

The imposition of massive tariffs on electric vehicles by China by the U.S. and other countries is not a favorable situation for us in the medium to long term.

This is because, as countries impose retaliatory tariffs such as tariff bombs on one another, the probability of being hit by collateral damage increases due to the nature of our economy, which relies on exports for its livelihood.
While various analyses regarding finished vehicles and parts are being released, it can be said that they are not helpful overall.

Of course, the chaos in the global market economy caused by the Chinese government's illegal subsidies is largely self-inflicted, and it can be said that serious distortions are occurring.

Clear regulations regarding this are necessary.

In the case of the U.S. market, imposing even higher tariffs seems meaningless given that the entry of Chinese electric vehicles is already impossible.

It is interpreted as a warning not to even approach the U.S. market.

Unlike the U.S., the European market has a 10% tariff, so Chinese electric vehicles are already capturing a significant portion of it.

In Germany and other countries, the market share of various low-cost electric vehicles is gradually increasing, led by Chinese BYD dealerships.

Since the latter half of last year, the European Union has been investigating the Chinese government's illegal subsidies in earnest, driven by a sense of crisis.

Based on the above, a decision was recently made to impose tariffs, and even higher tariffs will be imposed starting next month.

Tariffs ranging from about 17% to about 37% will be added, centered on key Chinese electric vehicle manufacturers such as BYD, resulting in an overall average tariff of 21%.

Chinese electric vehicles are expected to face significant constraints in penetrating the European market.

As China is expected to retaliate with tariffs, protectionism in the global market is expected to intensify further.

Chinese electric vehicles have been equipped with various advantages, such as abundant domestic battery raw materials and low production costs.

In addition, within China, which accounts for approximately 50% of the global marketBased on its rich market, it is entering the global market in earnest, focusing on proven models and securing diverse and extensive data.

They are currently focused on exports driven out by force, spearheaded by Chinese batteries and electric vehicles, which are already in oversupply.

The imposition of anti-dumping tariffs in Europe is expected to block the entry of Chinese electric vehicles and even restrict markets they have already entered, while also bringing reciprocal benefits to us.

Hyundai-Kia's market share in Europe is approximately 11%, and the vehicles are already being given significance as practical and positive models.

With Chinese electric vehicles failing to enter the U.S. and European markets, a fierce war with China is expected in the new markets we are targeting, such as Southeast Asia, the Middle East, and South America.

Currently, Toyota is the world's number one automaker, followed by Volkswagen Group and Hyundai Motor Group, but in the future electric vehicle-based market, China's BYD is expected to become the global leader.

To prepare for this, integrated preparation is required for every aspect, including the development of new technologies and differentiated vehicle models, as well as marketing strategies thoroughly tailored to local tastes.

In particular, given that Chinese electric vehicles, which offer high price competitiveness relative to quality, are targeting the global market and are expected to capture a share of the mid-to-low price segment, it can be said that this is a time when thorough and sufficient preparation is definitely required.

With Chinese electric vehicles beginning to aggressively target our market where it is difficult to raise tariffs immediately, now is the time when we must first focus on defending our market share in our own territory.