People visit an exhibition of Chinese electric vehicle maker BYD at the Essen Motor Show in Essen, Germany, Nov. 29. AP-Yonhap

BYD is expected to make quicker inroads into the Korean market by leveraging potential ties with Affinity Equity Partners, a Hong Kong-based private equity firm that holds management rights for the two largest rental car companies in the country, industry officials and experts said, Thursday.

The Chinese electric vehicle (EV) maker is nearing the completion of preparations for passenger car sales in Korea, ahead of its official debut in January. The company is the world's largest EV manufacturer based on global sales volume.

BYD's upcoming debut may not pose an immediate threat to Korean competitors, given the relatively low perception of Chinese vehicles among local customers. However, market watchers acknowledge the possibility that the EV giant could gradually build its brand awareness by supplying its flagship EV models to major rental car operators.

"Korean customers still have limited trust in Chinese vehicles, but this could change as the perception of BYD improves after a significant number of the company's EVs are supplied to rental car firms nationwide," said an official from the local auto industry.

In June, Affinity took over a controlling stake in SK Rent-a-Car, the nation's second-largest rental car business operator. Early this month, Affinity was named the preferred bidder to acquire Lotte Rental, the market leader in the sector. As of the end of September, the two firms' combined market share reached over 35 percent here, operating some 450,000 rental cars.

BYD's K9 electric bus / Courtesy of BYD

"If BYD clears away any lingering concerns over its quality and draws more favorable responses from customers, the carmaker will be able to expand its footing, as was the case with Chinese EV buses which have achieved robust growth here for the past few years," the official said.

In 2019, Chinese electric buses accounted for just 23.9 percent of the market in Korea, but this figure surged to 54.1 percent last year, driven by their unmatched price competitiveness.

Experts have raised concerns that the share of Chinese EV makers in the Korean market is likely to grow, as the country is unable to impose significant sanctions through tariffs.

"Korea will not be able to impose countervailing duties on Chinese EVs, as the local economy is highly vulnerable to retaliatory measures from China (due to Korea's strong trade reliance on China)," said Kim Pil-soo, an automotive technology professor at Daelim University College.

According to data from auto market tracker DataForce, Chinese EVs have experienced sluggish growth in Europe due to punitive tariffs on vehicles imported from the world's second-largest economy. In November, Chinese EVs accounted for 7.4 percent of the European EV market, a decrease of 0.8 percentage point from the previous month and the lowest figure since March of this year.

However, the scenario is not feasible in Korea whose economy is heavily reliant on trade with China, according to Kim.

Starting with BYD, several other Chinese EV makers are set to enter the Korean market, hoping to replicate their success in the EV bus market and expand their foothold in the passenger EV sector, the expert said.

"There is a growing likelihood that the market share of Chinese passenger EVs will increase in Korea, which could pose a threat to Korea's key industrial sectors, such as EVs and batteries," he said.