Last year, Hyundai Motor Company, Kia and KG Mobility generated roughly 24 trillion won ($18 billion) in global electric vehicle (EV) sales. Hyundai and Kia, which sold only 26,000 EVs globally in 2017, increased sales to 420,000 last year. The combined sales of LG Energy Solution, SK On, and Samsung SDI, which manufacture EV batteries, reached 69 trillion won. These companies collectively accounted for 48.6% of the global battery market, excluding China, by the end of last year.
A robust supply chain supported the growth and success of South Korea’s EV industry. Companies like Ecopro, L&F, and Cosmo Advanced Materials produce critical battery components such as anode and cathode materials and copper foil. Ecopro leads the ternary cathode materials market, with L&F and LG Chem ranking fourth and fifth, respectively. SK Nexilis is the global leader in copper foil for cathode materials.
Once a latecomer in the 140-year history of the global automotive industry, South Korea has become a key player in the global EV market in less than 20 years. However, there are growing concerns that maintaining this competitive edge may prove challenging, as the EV market downturn, known as the “EV chasm,” and rising safety fears over EVs, or “EV phobia,” in Korea after a fire that broke out in an underground parking lot, undermine the industry’s progress.
South Korea is among the top countries most affected by the global EV market chasm. Domestic EV sales dropped by 16.5% in the first half of this year compared to the same period last year, according to the Korea Automobile and Mobility Association (KAMA) on August 25. This decline contrasts with the growth in other major markets, such as China (9.3%), the U.S. (6.1%), and France (13.9%).
In South Korea, the EV chasm began to take hold in the second half of last year due to several factors. The economic slowdown, higher EV prices compared to fossil fuel vehicles and the preference for hybrid cars as a more practical alternative have all contributed to this trend.
Adding to these challenges is the recent surge in EV safety concerns following the Cheongna fire caused by a Mercedes-Benz EQE electric sedan earlier this month. The fire is fueling a nationwide “EV phobia,” leading to a further slowdown in the market. “Not only have there been no new inquiries about EVs from dealers, but customers are also canceling existing contracts,” said an official from an automaker.
The strong domestic market has been one of the key factors behind the rapid growth of Korea’s EV industry. Hyundai and Kia generated profits from internal combustion engine vehicles and hybrids, which they reinvested into developing EVs. Experts emphasize that the significance of domestic demand goes beyond mere sales figures.
“To achieve economies of scale and reduce production costs, it is crucial to maintain robust domestic demand for EVs,” said Lee Hang-goo, director of the Jeonbuk Institute of Automotive Convergence Technology. Expanding exports based on a solid domestic market has been the traditional success strategy of the Korean automotive industry.
There are also concerns that a slump in the domestic market could weaken the charging infrastructure, which is vital to the EV ecosystem. Following recent EV fire incidents, signs of EV phobia evolving into a “Not In My Backyard” (NIMBY) sentiment are becoming prominent, with many people now opposing the installation of EV chargers in their neighborhoods.
