Chinese Automakers’ Export Surge and Decrease in Domestic Production Volume Raise New Competitive Pressure on Hyundai Motor and Kia Exports
Vehicles awaiting export parked at Pyeongtaek Port in Pyeongtaek, Gyeonggi Province.
As the export volume of Hyundai Motor Company and Kia shows a declining trend for three consecutive years, concerns over the production competitiveness of the Korean automobile industry are growing. Although the impact of external variables such as the expansion of local production in the United States and geopolitical risks in the Middle East was significant, there is also analysis that the position of Korean-made cars could be shaken as Chinese automakers begin an aggressive expansion of global exports in earnest.
According to the Korea Automobile & Mobility Association (KAMA) on May 18, the combined export volume of Hyundai Motor and Kia from January to April this year totaled 735,758 units. After peaking at 766,196 units in 2023, the figure drew a downward curve for three consecutive years, following 754,267 units in 2024 and 738,544 units last year.
The export volume of Hyundai Motor and Kia rapidly increased, rising from the level of 490,242 units in 2020 to the 600,000-unit level in 2021 and 2022, and then surpassing 760,000 units in 2023, but it is evaluated to have entered a phase of stagnation recently.
The proportion of Hyundai Motor and Kia in Korea’s total finished vehicle exports is also decreasing. The proportion of Hyundai Motor and Kia rose to 84.9% in 2021, but fell to the 78.1% level this year. This is due to the impact of the total exports of Korean finished vehicles increasing while the export volume of Hyundai Motor Group decreased. From January to April this year, Korea’s total exports of finished vehicles reached 942,208 units, which increased by 2.3% compared to the same period last year. The expansion of exports by General Motors (GM) Korea and KG Mobility is analyzed to have influenced this.
In addition, the fact that Hyundai Motor and Kia are expanding local production to respond to the United States tariff issue, coupled with geopolitical risks in the Middle East, is interpreted to have influenced the decrease in exports to certain regions.
In fact, in the case of Kia, exports to Canada and Mexico from January to April this year increased by 61.9% and 79.7% respectively compared to the same period last year, but exports to the United States and the Middle East and Africa decreased by 10.3% and 30.3% respectively. Hyundai Motor was also significantly affected by the decrease in volume in Russia, the Commonwealth of Independent States (CIS), and the Middle East region.
Hyundai Motor will begin producing the Kia Sportage Hybrid at the Hyundai Motor Group Metaplant America (HMGMA) starting in the second half of this year. There is an evaluation that a structural change is occurring where the export role of Korean factories is being partially reduced as the ‘local production and local sales’ system is strengthened in the global market.
The part the industry is most concerned about is the rapid export expansion of Chinese automakers. Chinese companies are rapidly increasing their global market share by making up for sluggish domestic demand through expanding sales in overseas markets. According to the China Passenger Car Association (CPCA), China’s passenger car exports in April this year increased by 80.7% compared to the same month last year.
In particular, in April, the export proportion of China’s new energy vehicles (NEVs), such as electric vehicles and plug-in hybrid electric vehicles (PHEVs), surpassed internal combustion engine vehicles for the first time. Chinese companies are rapidly encroaching on the Middle Eastern, South American, and Southeast Asian markets, putting forward their price competitiveness. The offensive of Chinese-made electric vehicles and sport utility vehicles (SUVs) is intensifying even in emerging markets where Hyundai Motor and Kia had shown strength.
Lee Hang-koo, a research fellow at the Korea Automotive Technology Institute, said, “As Chinese companies aggressively push out export volumes, competition in the global market is becoming fiercer,” adding, “Concerns are growing over whether the structure of producing in and exporting from Korea will be able to maintain price competitiveness in the long term.”
Concerns are also emerging over the weakening of the domestic production base. It is pointed out that, amid the full-scale entry of Chinese brands such as BYD into the domestic market, stable export performance must be supported for domestic production bases to maintain competitiveness. There is also analysis that if the slowdown in exports is prolonged, it could lead to a decrease in domestic production volume, a decline in the attractiveness of production bases, and further, a reduction in jobs.
In fact, Hyundai Motor’s domestic production volume in the first quarter of this year decreased by 3.3% compared to the same period last year. The fact that domestic sales volume decreased by 8.9% up to April this year had an impact.
In particular, the lines at Hyundai Motor’s Ulsan Plant 1 and Plant 4 are undergoing production adjustments in the process of facility improvements for the transition to electrification. They will go into reconstruction after being demolished around next year. It is a structure where domestic production capacity is bound to decrease. The industry expects that the need for policy support to maintain the competitiveness of domestic factories will grow in the process of the transition to electric vehicles and the reorganization of the global supply chain taking place simultaneously in the future.
Accordingly, the necessity of introducing the ‘Domestic Production Promotion Tax System’ is also being raised again in the industry. The Domestic Production Promotion Tax System is a system that provides tax benefits in proportion to the costs invested by companies to produce goods domestically, and is also called the ‘Korean version of the IRA (Inflation Reduction Act)’. President Lee Jae-myung also presented a related pledge during his days as a presidential candidate.
Cho Chul, a senior research fellow at the Korea Institute for Industrial Economics and Trade, said, “The expansion of local production itself does not necessarily lead to a decrease in domestic exports, but in the long term, the key is how much domestic production capacity can be maintained and expanded,” adding, “Tax and policy support that can give a signal that domestic production investment is advantageous is necessary.”
Michael Herh
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