Chinese electric vehicle (EV) manufacturers are gearing up to enter the South Korean market with major player BYD leading the charge. Scheduled to officially debut on January 16, BYD will launch its electric compact SUV, the Atto 3, marking what could be the beginning of significant changes within the local auto industry.
BYD’s entry raises questions about its potential impact on the South Korean automotive market. With the South Korean government currently certifying several other BYD models, including the Seal, Dolphin, and Sealion 7, the company’s ambitions extend beyond just one model. This expansion is part of BYD’s overarching plan to tap new consumer bases and compete against established domestic brands.
Experts remain divided on how well Chinese EVs will perform. While there’s potential for market disruption, particularly with their pricing strategies, the reality reflected by previous experiences is concerning. BYD’s earlier venture did not fare well after entering the Japanese market. Despite bold plans to sell 30,000 units annually, cumulative sales reached only 3,669 units by the end of 2024. Strong brand loyalty among Japanese consumers presented challenges similar to those BYD might face within South Korea. According to surveys conducted, 83.8% of South Korean consumers prefer local brands, which is slightly lower than Japan's 93.8% but still significant.
A Consumer Insight survey conducted last September found only 9% of South Korean prospective car buyers considering Chinese EVs. Even more starkly, two out of five respondents outright rejected the notion of purchasing Chinese-branded vehicles, regardless of price. Given this backdrop, BYD’s success is far from guaranteed. South Korea’s sluggish EV adoption rate adds another layer of difficulty, as new registrations have only marginally increased from 115,822 units in 2023 to 122,775 units in 2024.
On the flip side, the pricing advantage could alter the dynamics of the market significantly. According to the survey, if Chinese EVs are offered at 50-60% of the pricing of local models, 61% of surveyed consumers showed willingness to reconsider their options. Compelling pricing for BYD’s Atto 3 and Seal models could position them as attractive alternatives to locally manufactured vehicles. Analysts predict these models could be marketed for at least 5-10 million won ($3,800-$7,600) less than comparable South Korean offerings due to BYD’s cost efficiencies stemming from its economies of scale and vertical integration, particularly with batteries.
That said, using aggressive pricing strategies akin to those employed by Tesla might be key. Tesla’s China-made Model Y, which slashed prices by approximately 20 million won last year, became the top-selling imported car within South Korea, with 18,717 units sold. Observers suggest BYD and other Chinese EV manufacturers might replicate similar tactics to carve out their own market share.
Response from local industry players has been significant. Hyundai Motor Group announced record domestic investments of 24.3 trillion won set for 2025, primarily as a strategy to fend off growing competition from Chinese EV manufacturers. "If Korean automakers fail to act now, resurgent EV demand could be captured by Chinese brands," warned Kim Kyung-yoo, a researcher at the Korea Institute for Industrial Economics & Trade. The investment aims to secure market share as the EV sector recovers and revives over the coming years.
BYD’s anticipated aggressive entry, coupled with the growing presence of other Chinese manufacturers like Zeekr, has created ripples of both concern and excitement within South Korea's EV market. There are rumors BYD might utilize GM Korea’s former Gunsan plant for production and Zeekr could leverage Renault Korea’s Busan facility. This intensified competition signals to consumers and industry insiders alike – the EV market stands at a pivotal moment. The growth and strategies of Chinese automakers are being closely watched, and their entry might very well reshape the domestic market dynamics.
Given the existing local loyalty and skepticism toward foreign brands, how BYD navigates its entry and pricing strategies could determine its long-term viability and success within the South Korean market.