The BYD logo is displayed at the Beijing Auto Show, April 25. AFP-Yonhap
Hyundai Motor, Kia and POSCO are in urgent need of government assistance to thwart escalating pressure from their Chinese counterparts, as more price-competitive electric vehicles (EV) and steel products from Asia's largest economy will make aggressive inroads into Korea in the era of U.S. President-elect Donald Trump, experts said Monday.
EVs and steelmaking will be the two most vulnerable industries in Korea to be sandwiched by the hegemonic war between the U.S. and China after Trump regains his presidency in January.
This prompted calls for local carmakers and steelmakers to partner with the government to minimize the potential aftermath of the looming trade landscape change.
Trump continues reiterating his threat to impose a tariff of up to 60 percent on goods imported from China to the United States. China, for its part, will make up for its potential trade loss in the U.S. by expanding exports to Korea and other Southeast Asian markets, according to market watchers.
BYD, the world's largest EV maker, is in the final phase of preparations for the sales of its EV sedans and SUVs in the Korean market this January. This is the first time the company will initiate sales for passenger cars in Korea.
As Tesla also made steep sales growth in only a couple of years, Korean carmakers are on high alert over BYD's inroads here. According to market tracker SNE Research, BYD surpassed Tesla in the number of combined EV sales for the first nine months combined this year, winning the title of the world's top-selling EV maker.
BYD's core strength comes from its price competitiveness, as it manufactures lithium iron phosphate (LFP) batteries on its own.
Experts underscored the importance of strengthening the partnership between local carmakers and the government.
“Even if the government is on track to stop offering subsidies for EVs equipped with LFP batteries due to their environmental impacts, this is not enough to retrain rapid inroads of Chinese EVs,” Kim Pil-soo, an automotive technology professor at Daelim University College, said.
This is because BYD's cheap lineups, set to be sold in Korea, still hold a competitive edge in prices against their rivals in the similar segment, according to Kim.
“There is no clear breakthrough for the time being, so the government and consumer organizations should team up with domestic carmakers to prevent Chinese EVs from engulfing the local market,” he said.
Seen above is a manufacturing facility of POSCO in the southeastern city of Pohang in this undated file photo. Yonhap
Things are even worse for steelmakers represented by POSCO.
The steelmaker reported a disappointing operating profit of 438 billion won ($313 million) in the third quarter, down 39.8 percent from a year earlier, hit by Chinese players' oversupply in the global steel industry. To mitigate declining profitability, the company recently ended up shutting down one of its factories here.
“Chinese steelmakers will focus on expanding exports not just to Korea, but other Asian markets to reduce the Trump risk,” Kim Moon-tae, head of an industry policy division at the Korea Chamber of Commerce and Industry, said.
“The government is advised to help local players diversify their export channels so they can reduce shocks in the Trump era."