BYD has taken the top spot in South Korea for sales of electric and hybrid vehicles within a year of entering the market, bringing to Korea the low-price strategy it used to expand its share in Europe. Experts, however, said further growth will be harder to sustain over the long run, pointing to a thin service network and high repair costs as negative factors.
BYD sold 18,000 electric and hybrid vehicles in South Korea from January through August, a ninefold increase from a year earlier, according to Bloomberg Intelligence data compiled as of the 25th. Comparable sales at Hyundai Motor fell 6% to about 139,000 vehicles over the same period.
BYD, which entered the Korean market last year, has focused on pricing. Its Dolphin hatchback starts at 24.5 million won ($17,000), and discounts can bring the price below 23 million won. That is comparable to the entry-level version of Hyundai Motor's Casper Electric, priced at 22 million won. Unlike the Casper, which carries a waiting period of about two years, BYD has been able to deliver quickly. BYD registered 20,000 vehicles in September, double its target for the start of the year, according to data from the Korea Automobile & Mobility Association.
Experts said Chinese brands will nonetheless run up against barriers over the longer term: limited service coverage, high repair costs, expensive insurance premiums and rapid depreciation. On online driver forums, BYD owners frequently complain about delays in parts supply and steep repair bills. Cases have surfaced in which repair costs exceeded 11 million won even for light scrapes to bumpers and fenders.
In response, BYD plans to expand its service centers in South Korea to 26 from 20 by the end of this year. Whether that will meaningfully change the level of service remains unclear. Brian Lee, an analyst at CLSA Securities Korea, said BYD's low-price strategy will ultimately be tested against Hyundai Motor and Kia, which together maintain a domestic network of more than 1,200 service centers. "Right now everyone is focused solely on vehicle prices," he said, adding that "over time, as used-car prices, service access and maintenance costs become clearer, the appeal of the vehicles could fade."
Chinese automakers are still accelerating their push into South Korea. Domestic demand at home is slowing, barriers in Europe are rising and they are effectively shut out of the U.S. market. South Korea, by contrast, levies an import tariff of just 8% on Chinese passenger cars, and in August it excluded electric vehicles from a bill granting tax credits to domestic manufacturers. That leaves Hyundai Motor and Kia with few policy shields against cheap Chinese imports.
The Korea Automobile & Mobility Association last month asked the National Assembly to pass tax and policy support measures. The association represents five domestic automakers, including GM Korea, Renault Korea and KG Mobility. "The penetration of Chinese electric vehicles could trigger the collapse not only of domestic EV makers but of the entire automotive industry," the association said in a statement. Lawmakers from both the ruling and opposition parties this month introduced a bill that would provide tax credits of up to 50% of annual domestic production costs for strategic industries, including electric vehicles.
BYD, meanwhile, is broadening its lineup with the Sealion 6 DM-i plug-in hybrid, priced at 37.5 million won, the lowest in its class. Zeekr, the premium brand of Geely Automobile, began deliveries of its 7X electric sport utility vehicle last week after taking more than 1,500 pre-orders. Xpeng and Chery Automobile have set up Korean units ahead of their market entry.