{"id":2206853,"date":"2024-10-18T14:00:44","date_gmt":"2024-10-18T05:00:44","guid":{"rendered":"https:\/\/koreapro.org\/?p=2206853"},"modified":"2024-10-18T12:10:00","modified_gmt":"2024-10-18T03:10:00","slug":"south-koreas-electric-bus-market-sees-chinese-brands-dominate-sales","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2024\/10\/south-koreas-electric-bus-market-sees-chinese-brands-dominate-sales\/","title":{"rendered":"South Korea\u2019s electric bus market sees Chinese brands dominate sales"},"content":{"rendered":"

The Chinese electric bus Higer Hypers made its South Korean debut in 2018, entering a market with minimal domestic competition. Just five years later, it has become the <\/span>best-selling<\/span><\/a> electric bus in Seoul, recording 394 units sold nationwide last year \u2014 a striking achievement for a relatively new entrant.<\/span><\/p>\n

Higer Hypers is one of many Chinese electric buses rapidly gaining ground in South Korea. Manufacturers like BYD and King Long have also expanded their presence, collectively capturing <\/span>more than half<\/span><\/a> of the domestic market share for new electric vehicles last year.<\/span><\/p>\n

South Korea\u2019s electric bus market has surged, driven by the country’s ambition to achieve <\/span>carbon neutrality<\/span><\/a> by 2050. Government subsidies have played a significant role in this growth, with electric bus funding <\/span>more than doubling<\/span><\/a> from about $22.1 million (30 billion won) in 2019 to $58.9 million (80 billion won) by 2021.<\/span><\/p>\n

Yet despite the expanding market, only four South Korean automakers compete with their Chinese counterparts. Chinese buses accounted for 47% of all electric bus sales from January to Oct. 2022, <\/span>peaking<\/span><\/a> at a 62% market share in August of the same year.<\/span><\/p>\n

In response, the South Korean government has implemented measures aimed at preventing Chinese manufacturers from dominating the market. Among these, increasing <\/span>support for hydrogen-powered buses<\/span><\/a> stands out \u2014 an area where Chinese manufacturers have yet to make significant inroads.<\/span><\/p>\n

However, China has ambitious plans for this sector, aiming to have <\/span>one million<\/span><\/a> hydrogen vehicles on the road by 2030 as part of its pledge to reach carbon neutrality by 2060.\u00a0<\/span><\/p>\n

This growing competition between South Korea and China in the new energy vehicle sector raises concerns about the future competitiveness of domestic manufacturers.<\/span><\/p>\n

\"\"

An illustration of electric buses | Image: Korea Pro<\/em><\/p><\/div>\n

WAVE OF POPULARITY<\/b><\/p>\n

One major factor behind the popularity of Chinese electric buses in South Korea is their price. On average, they are about $74,000 (100 million won) cheaper than their South Korean counterparts.<\/span><\/p>\n

This cost advantage is largely due to the use of lithium iron phosphate (LFP) batteries, which are approximately <\/span>30%<\/span><\/a> less expensive than the nickel cobalt manganese (NCM) batteries used in most South Korean buses.<\/span><\/p>\n

For example, Hyundai Motor\u2019s Elec City, a popular domestic electric bus, costs up to $258,000 (350 million won), whereas BYD\u2019s eBus is priced at around $184,000 (250 million won). Despite the price difference, the two models perform similarly in terms of <\/span>driving capabilities<\/span><\/a>.<\/span><\/p>\n

The key difference lies in the battery technology, with Hyundai favoring NCM batteries for their higher energy density, while BYD opts for LFP batteries, which are cheaper but less energy-efficient.<\/span><\/p>\n

Generous subsidies from the South Korean government have also helped foreign electric vehicle manufacturers thrive. According to the transport ministry, approximately $124.5 million (<\/span>169 billion won<\/span><\/a>) in subsidies were allocated to Chinese bus companies between 2018 and 2022.<\/span><\/p>\n

\u201cChinese electric buses have quickly entered the domestic market and increased their market share due to the Ministry of Environment\u2019s introduction of subsidies before Korean brands like Hyundai were able to commercialize their electric buses,\u201d Kang Hee-chan, a professor of economics at Incheon University, told <\/span>Korea Pro<\/span><\/i>.<\/span><\/p>\n

Loose regulations around government subsidies for foreign carmakers have further enabled Chinese manufacturers to grow in South Korea. However, bypassing international trade rules to protect the domestic market is not feasible.<\/span><\/p>\n

\u201cAvoiding World Trade Organization rules to shield domestic companies is not an option. The most effective strategy is to gradually increase subsidies in line with the commercialization of domestic electric and hydrogen vehicle technologies,\u201d Kang added.<\/span><\/p>\n

ROK GOVERNMENT RESPONSE<\/b><\/p>\n

While the South Korean government has not directly restricted Chinese electric vehicles, it has introduced initiatives designed to protect domestic manufacturers. For instance, the \u201c<\/span>minimum self-contribution<\/span><\/a>\u201d policy requires buyers of large electric buses to pay at least $74,000 (100 million won) out of pocket for their purchase.<\/span><\/p>\n

This move aims to prevent Chinese bus makers from selling their vehicles below the total subsidy amount, which had previously given them a price advantage. The policy also limits the subsidy to 70% of the vehicle\u2019s price, ensuring that excess subsidies are deducted.<\/span><\/p>\n

Additionally, the government has announced plans to reduce subsidies for buses equipped with low-efficiency batteries. This decision favors domestic manufacturers, as their NCM batteries have <\/span>higher energy density<\/span><\/a> compared to the cheaper LFP batteries used in Chinese buses.<\/span><\/p>\n

With battery efficiency now playing a significant role in determining subsidy amounts, Chinese buses may lose their price competitiveness.<\/span><\/p>\n

The effects of these policies are already becoming apparent. For instance, the subsidy for BYD\u2019s e-BUS 12 was <\/span>reduced<\/span><\/a> by around $21,000 (28 million won) compared to last year, while the subsidy for the 41-seater BYD e-BUS 9 is approximately $33,000 (45 million won) lower than that for Hyundai\u2019s Elec City Town 41-seater model.<\/span><\/p>\n

These adjustments have contributed to a resurgence of domestic market share. In the first half of this year, 59.3% of newly registered electric buses were <\/span>domestically produced<\/span><\/a> \u2014 an 18.6 percentage point lead over the 40.7% market share held by Chinese buses. This marks the largest gap in the past four years.<\/span><\/p>\n

\"\"

An illustration of people waiting to board a bus | Image: Korea Pro<\/em><\/p><\/div>\n

WHAT NEXT\u00a0<\/b><\/p>\n

While domestic producers have made gains, the influx of Chinese electric buses continues to reshape not only the South Korean market but others as well. For instance, in Thailand, the arrival of Chinese electric vehicles has significantly altered the automotive industry, putting China <\/span>ahead<\/span><\/a> of global rivals such as Japan and the U.S.<\/span><\/p>\n

Chinese manufacturers <\/span>leverage<\/span><\/a> large-scale production, efficient supply chains and strong governmental support to offer competitive pricing in international markets. This competitive edge has <\/span>prompted<\/span><\/a> the EU and the U.S. to impose tariffs on Chinese vehicles, aiming to protect their own domestic industries from being overwhelmed.<\/span><\/p>\n

In South Korea, the government is combating the rise of Chinese electric buses by focusing on <\/span>hydrogen-powered vehicles<\/span><\/a>. Hydrogen buses, still in their early stages of commercialization, are seen as a strategic area where South Korea can outmaneuver China, which has not yet made significant advances in hydrogen technology.<\/span><\/p>\n

However, Beijing has outlined ambitious plans to expand its hydrogen bus production. This intensifying competition poses significant challenges for South Korean manufacturers.<\/span><\/p>\n

For South Korea, advancing both hydrogen and electric vehicle technologies is crucial to achieving its carbon neutrality goals. But without proper safeguards in place, the country risks losing its competitive edge to China. The current emphasis on subsidy differentiation may not be enough to fend off Chinese competition, as highlighted by industry experts.<\/span><\/p>\n

\u201cSubsidy differentiation alone won\u2019t be sufficient to counter the influx of Chinese electric buses,\u201d <\/span>said<\/span><\/a> Kim Tae-ho, former president of Seoul Metro. \u201cWe need to view electric buses not just as an environmental necessity but also as a critical national industry. New support measures must be introduced to foster domestic growth in this sector.\u201d<\/span><\/p>\n

Edited by John Lee<\/span><\/i><\/p>\n

Business & Economy<\/span><\/a>Domestic Politics<\/span><\/a>Technology & Cyber<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"

The Chinese electric bus Higer Hypers made its South Korean debut in 2018, entering a market with minimal domestic competition. Just five years later, it has become the best-selling electric bus in Seoul, recording 394 units sold nationwide last year \u2014 a striking achievement for a relatively new entrant. 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