Invest KOREA

Korea is accelerating the transition to future vehicles by actively responding to the global trend of retiring internal combustion engines and participating in the race to develop autonomous driving technologies. In 2023, Korea broke the record by exporting vehicles worth USD 70.9 billion, beating the previous record1 by 30%, by exporting high value-added eco-friendly vehicles2 . In 2020, Korea ranked 7th in the world for readiness to introduce autonomous vehicles (KPMG, 2020). Trends such as electrification and autonomous driving technologies are boosting the market for electrical and electronic components and software in the automotive sector and creating new business opportunities, which in turn requiring businesses to develop and secure technologies. Korea is actively responding to these changes in the industrial landscape and to the expanding global competition, thereby enhancing its global competitiveness in the future car industry.

In 2023, Korea's car exports set a new record, led by the growth of eco-friendly vehicles. With a strong momentum in eco-friendly vehicle exports, particularly in the North American and European Union (EU) markets, the export value of eco-friendly vehicles in 2023 increased by 50.5% year-on-year to USD 24.2 billion, accounting for a substantial 34.2% share of the total car exports. The export volume also increased by 31.3% year-on-year to 728,779 units, accounting for 26.3% of the entire car exports. As of 2022, Korea holds a competitive position in the global market, ranking 3rd in BEVs, 8th in PHEVs, 5th in HEVs in terms of export competitiveness.

The global autonomous driving industry is currently in its infancy, anticipating a substantial growth with the advent of Level 3 ³⁾ in 2025. The market for fully autonomous vehicles led by commercial sector vehicles is expected to grow around 2030⁴⁾ . The global autonomous vehicle (Level 3 and 4) market is projected to reach USD 1.1 trillion in 2035, growing at a compound annual growth rate (CAGR) of 41% from USD 7.1 billion in 2020. In terms of sales volume⁵⁾ the market is anticipated to grow from 14,350 units in 2021 to 694,254 units in 2025 and 2,087,036 units in 2028. Korea's autonomous vehicle market is expected to reach KRW 26.2 trillion in 2035, growing rapidly at a CAGR of about 40% from KRW 150.9 billion in 2020.

In line with the global effort of carbon neutrality, Korea has set the registration and production targets for eco-friendly vehicle by considering the calls of the global community and domestic environment, while supporting the rapid transition to future vehicles and mobility innovations. Considering the nation’s upward adjusted Nationally Determined Contributions (NDCs) (October 2021), Korea introduced more ambitious targets to roll out 4.5 million zero-emission vehicles by 2030 (including 3.62 million EVs and 0.88 million hybrid vehicles) by adjusting the original target of 3.85 million vehicles (3 million EVs and 0.85 million FCEVs)⁶⁾ . The government aims to increase the registration of eco-friendly vehicles from 7.85 million to 8.5 million by 2030, in an effort to reduce the country’s carbon emissions by 37.8% from 2018 levels. In September 2022, the government announced the strategy to rise as the world’s top three automotive powerhouses by 2030, which includes targets of producing 3.3 million EVs and achieving a global market share of 12%. In addition, the government issued guidelines for temporarily permitting autonomous driving of Levels 3 and above (allowed from February 2016) in October 2022 and plans to refine the system for commercializing Level 4. According to the Mobility Innovation Roadmap (September 2022), the government plans to introduce Level 4 buses and shuttles by 2025 and roll out Level 4 passenger cars by 2027. To commercialize Level 4 by 2027, the government plans to prepare related systems by 2024 and build real-time communication infrastructure on about 110,000 kilometers of roads nationwide by 2030. Moreover, Korea enacted the Special Act on Future Vehicles7 in January 2024 to include software as a core technology for future vehicles and laid grounds for promoting foreign investment (Article 26, paragraph 1).

Despite concerns over the slowdown of the global EVs market, Hyundai Motor Company and Kia Motors plan to maintain their existing mid- to long-term global production and sales targets8 , while Renault Korea and KG Mobility began building eco-friendly vehicle production lines, further expanding the nation’s capacity to supply eco-friendly vehicles. In response to the recent calls for carbon regulations and supply chain management in developed countries, Korean players are building systems to better respond to strengthened regulations. Amid growing interests in life cycle assessment (LCA) designed to evaluate a vehicle’s environmental impacts over its entire life cycle, Hyundai plans to manage carbon emission targets for new vehicles by collecting and managing the LCA data of newly-launched vehicles worldwide. In addition, following the enactment of the Inflation Reduction Act (IRA) in the United States (August 2022), Hyundai and Kia responded by strengthening the sales (and leasing) of commercial EVs, and are planning and reviewing production at their manufacturing plants in the US. In 2023, Hyundai and Kia sold 278,122 units of EVs in the US, up 52.3% from the previous year, to achieve a market share of 23.9% in the American eco-friendly vehicle market.

Korean automakers are also joining the race for partnerships and technology development to grasp opportunities in the autonomous driving market. Hyundai and Kia acquired autonomous driving software 42dot (August 2022), and Motional, established as an autonomous driving joint venture with Aptiv (March 2020), saw its global ranking rise among autonomous driving technology developers9 . Motional plans to roll out robotaxis in major US cities in 2024, and RideFlux, a startup developing autonomous driving technology, is focused on commercializing Level 4, including demonstrating its Level 4 autonomous driving car-sharing technology in Jeju Island (November 2023). In addition, Hyundai and Kia announced a roadmap to strengthen software technology by applying Over-the-Air (OTA) software updates to all new cars by 2025 and investing a total of KRW 18 trillion by 2030 (September 2022).

Korea is striving to join the world’s top-tier of future vehicle makers by flexibly transitioning to future vehicles and expanding industry boundaries. The Korean future vehicle market is expected to continue its growth with join effort of dedicated support from the government and adaptable strategy against surrounding environment from the management.