Chinese electric-vehicle maker BYD is growing rapidly in South Korea on the strength of low prices and technology, posing a threat to Hyundai Motor (005380.KS) and Kia (000270.KS), Bloomberg reported on the 25th.
BYD sold about 18,000 electric and hybrid vehicles in South Korea in the first eight months of this year, a ninefold increase from a year earlier, according to Bloomberg Intelligence data. Hyundai Motor's sales over the same period fell 6% to about 139,000 units.
BYD's momentum continued in September. Its cumulative registrations through September reached 20,000 units, already more than double its annual target, according to the Korea Automobile and Mobility Association. BYD, which entered the South Korean market early last year, has overtaken Volvo and Toyota in the country's imported car market on the back of that growth. Bloomberg called the performance all the more notable given that BYD was excluded from government subsidies in July after failing to meet some requirements.
Hyundai Motor and Kia still account for 72% of South Korea's auto market. But Bloomberg said the two companies are struggling to compete against the low prices and technology-focused models of Chinese automakers.
Esther Yim, an analyst at Samsung Securities (016360.KS), forecast that Hyundai Motor's global sales this year could fall short of its 4.16 million-unit target, coming in below 4 million units. That would be the first such shortfall since 2010, excluding 2020, when sales plunged because of the COVID-19 pandemic.
"The biggest factor behind the slowdown at Hyundai Motor and Kia is competition with Chinese companies," Yim said. "Aggressive export expansion by Chinese EV makers has triggered fierce price competition in every market except the United States and India."
Chinese automakers are stepping up their push into South Korea. BYD recently expanded its lineup with the Sealion 6 DM-i plug-in hybrid, priced at 37.5 million won, the cheapest in its class.
Zeekr, the premium brand of Geely Automobile, began customer deliveries of its 7X electric sport utility vehicle last week after surpassing 1,500 pre-orders. XPeng and Chery Automobile have also set up local units ahead of their entry into the market.
The Chinese advance has stirred a sense of crisis inside Hyundai Motor. Lee Jae-kyu, executive vice president in charge of vehicle development at Hyundai Motor and Kia, told an event this month that he "felt a sense of despair" after seeing the design and price competitiveness of Chinese automakers at the recent Paris Motor Show.
"Chinese vehicles had far better design and were about $10,000 cheaper," Lee said. "I couldn't shake the thought that European automakers are collapsing and that even Hyundai could eventually be eaten away by China."
Some analysts say it remains to be seen whether Chinese automakers can sustain their current growth. Thin service infrastructure, high repair costs, expensive insurance premiums and falling used-car prices are cited as obstacles.
"Right now everyone is focused only on the sticker price," said Brian Lee, an analyst at CLSA Securities Korea. "As the market matures and used-car values, service access and maintenance costs become clearer, the appeal of Chinese cars could fade."