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[Auto Parts] Toward a Self-Driving Future

Ranking first for average electric vehicle technology level, Korea is actively promoting electric cars and their components

The era of autonomous electric vehicles has arrived. The Korean government has strengthened fuel-efficiency, environmental and safety regulations in response to environmental issues such as fossil fuel depletion and global warming as well as social expenses following an increase in traffic accidents. 

With global demand for electric vehicles on the rise since 2010, more than 400,000 vehicles are expected on the market this year. Since the establishment of the “Implementation Plan for Distribution of Environmentally Friendly Automobiles” in 2005, the Korean government has also taken an active part in developing and supplying hybrid, electric and hydrogen fuel cell vehicles. Korea is expected to sell 30,000 hybrid and 2,500 electric vehicles and to export 20,000 hybrid and 5,000 electric vehicles. The government is also providing consumers with KRW 1 million (USD 883) in subsidies for hybrid cars and KRW 15 million for electric vehicles, in addition to vehicle purchase tax and other tax breaks.

Although electric vehicle sales in Korea are still relatively low, Hyundai Motor Company has secured mass production technology for the world's first hydrogen fuel cell vehicles. Hyundai has received hundreds of positive reviews from hydrogen fuel cell vehicle test drives in the United States and European countries. Furthermore, WardsAuto, a U.S. automotive research firm, nominated the Hyundai Tucson ix as one of “2015 Ward’s 10 Best Engines,” making it the first-ever cell fuel car engine technology to be nominated. In addition, Hyundai has strengthened relations with the U.S. Department of Energy for the successful establishment of the Korean-U.S. hydrogen fuel cell vehicle infrastructure to Hyundai’s advantage. 

According to phase 3 of Korea’s plan to promote the development and distribution of environmentally friendly automobiles, Korea aims to become one of the world’s top three countries for electric vehicle production by 2020. The Korean government and auto companies in the country actively promoted the foundation work for the development and commercialization of electric vehicles during phase 2 of the plan, between 2010 and 2015, but are now working on new goals for phase 3. The government and auto companies of Korea plan to produce 1.7 million electric cars and expand domestic sales and exports. 

Korea’s auto companies have consistently promoted the development and commercialization of electronic components on the basis of Korea’s outstanding electronics technology. Although the government has supported the development and commercialization of next-generation technology and smart cars since 2003, it has been analyzing related weak points through self-assessments, working to improve efficiency and commercialize self-driving cars after research institutes like Navigant Research gave low ratings to the competitiveness of automated vehicles. 

Comparison of Competitiveness of Domestic Smart Cars and Green Cars (Ⅰ)

Technological Field Technological Level '11(%) Technological Level '13(%) Country w/ Highest Level
Korea Japan China Korea Japan China
Smart Cars 86.0 99.5 69.4 83.8(-2.2) 97.6(-1.9) 67.1(-2.3) Europe
Green Cars 86.0 99.5 69.4 86.6(+0.6) 99.3(-0.2) 70.2(+0.8) Europe
Source: Korea Evaluation Institute of Industrial Technology (KIAT), 2015

Comparison of Competitiveness of Domestic Smart Cars and Green Cars (Ⅱ)

Technological Sector Key Items Technology Standard Technological Differences Between Countries
Smart Cars Convergent Infrastructure Technology 82.6 97.7 66.1 16.6 -15.1 31.6
Vehicle Safety Technology 82.4 96.3 66.1 16.3 -13.9 30.2
Vehicle Convenience Technology 82.4 96.3 66.1 16.3 -13.9 30.2
Green Cars Fuel Cell Vehicle 88.8 98.7 70.7 18.0 -9.9 28.0
Electric-Powered Automobile 87.8 100.0 74.4 13.4 -12.2 25.6
Hybrid Vehicle 86.1 100.0 72.7 13.4 -13.9 27.3
Source: Korea Institute of S&T Evaluation and Planning, 2015

Besides Korea’s auto industry, the information and communications technology (ICT) industry is also increasing investment in research and development (R&D) for the advancement of connected cars and autonomous automotive companies. Samsung Electronics has applied tablet PCs to BMWs and infotainment systems to Seats, a subsidiary of Volkswagen Spain.

LG Electronics is also co-developing a “stereo camera system” with Mercedez Benz and has agreed to supply key parts of the advanced driver assistance systems (ADAS) with U.S. Freescale Inc. Meanwhile, the Korean government is actively pursuing the development of electric cars and chargers for hydrogen fuel cell vehicles and has established test run roads and related substructure

for self-driving cars in Gyeonggi Province. 

Competition Between Companies 

In Korea, Hyundai Motor Company and Kia Motors will mass-produce hybrid cars, and Hyundai has emerged as the third-largest hybrid car dealer. Overseas, Toyota, Nissan, Ford, Mercedes Benz and Porsche are also currently selling imported hybrid cars. In the Korean market, Hyundai, Kia, GM Korea and Renault Samsung sell electric battery vehicles, while BMW and Nissan are among the foreign companies to import and sell electric cars.

Although automobile manufacturers in general have been accelerating the development and commercialization of autonomous electric vehicles, luxury automobile manufacturers are leading their commercialization. In particular, German luxury brands have been commercializing electric vehicles in cooperation with Korean battery manufacturers and have been promoting the development of connected cars. Because Korea’s battery manufacturers and ICT sectors are some of the most competitive globally, foreign automobile manufacturers are increasingly collaborating with Korean companies. Korea also ranks first for average electric vehicle technology level. 1) The country has established various support programs to promote joint R&D between domestic and foreign companies.

The progression of autonomous electric vehicle technology is causing auto makers to expand business and cooperation with related industries. In particular, auto makers are expanding technological and capital partnerships with and pursuing the acquisition of ICT companies for the commercialization of autonomous electric vehicles. Hyundai is also developing core technology for autonomous electric vehicles and expanding cooperation with domestic and foreign ICT companies.

Promising Domestic Sectors and Regions

Korea’s central and municipal governments have been actively promoting foreign investment in the country’s auto manufacturers.

The government is promoting the expansion of domestic production and electric cars and has also made long-term plans to eventually expand into the foreign companies of these promising sectors. Although Korean automobile manufacturers have relatively advanced hardware and strengths in car design,

assembly and parts production, they lack competitiveness in engineering, software development and core material compared to other developed countries. Therefore, capital investment and strategic alliances with foreign companies in these sectors are expected.

Korean automobile companies are pursuing the development and commercialization of electric-powered automobiles in collaboration with the central and municipal governments. The central government is supporting the development of core technology by creating a long-term road map while municipalities are attracting investment from both domestic and foreign parts suppliers by creating innovation clusters for parts based on the strengths of their regions.

Kia Motors factories in South Chungcheong Province and Gwangju produce the Kia Ray EV and Soul EV Electric Car batteries while GM Korea produces the Spark EV at its Changwon factory and Renault Samsung produces the SM3 electric car in its Busan factory. Ulsan has been developing and producing range-extended electric vehicle parts within the region since 2012, supporting small- and medium-sized electric car manufacturers as they make compact, commercial electric vehicles. In Gyeonggi and South Chungcheong provinces, small- and medium-sized electric car manufacturers promote product development and production in collaboration with municipal governments. Jeju Island is in the process of expanding test drive roads for electric vehicles and planning on replacing all vehicles with electric cars by 2030.

While Hyundai Motor Company is test driving hydrogen fuel cell vehicles both at home and abroad, South Chungcheong Province is negotiating with the central government to create cluster components of hydrogen fuel cell vehicles. Hyundai is planning to mass produce hydrogen fuel cell vehicles starting from 2020, and component manufacturers are currently working on developing corresponding technology.

The Daegu Metropolitan City substructure includes a small scale track for smart cars. As such, the Korean government, automobile manufacturers and related industries are jointly committed to the early development and commercialization of electric, self-driving vehicles. Also, municipal governments are actively promoting themselves for foreign investment. Foreign

companies should cooperate with subcontractors to strengthen their weaknesses and consider whether to invest in related clusters after analyzing the supply and value chain of Korea’s electric self-driving cars. Korea’s central and municipal governments should also take advantage of incentive policies and offer various incentives for foreign direct investment.

By Lee Hang-Gu

Senior Research Fellow

Industry Research Institute

1) Roland Burger, e-Mobility Index Q3 2015, 2015. 9

The above article does not necessarily reflect the views or position of KOTRA.

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