Chinese automakers opting for 'indirect landing' instead of direct market entry: The reason behind wearing the 'Made in Korea' label

*This content was translated by AI.

Recently, Chinese electric vehicles (EVs) and hybrid electric vehicles (HEVs) in the domestic automotive market are accelerating their strategy of abandoning independent market entry and partnering with mid-sized Korean automakers. Starting with a memorandum of understanding between KG Mobility and Chery Automobile, the most prominent example is SAIC-GM's Buick brand entering the market alongside Korea GM.

This stands in stark contrast to BYD Korea and ZEEKR Korea establishing local subsidiaries for direct market entry. The primary backdrop lies in tightened subsidy calculation criteria and a stringent post-sales management (A/S) evaluation system. Choosing so-called 'indirect entry' proves to be a practical option in terms of speed and cost.

The Ministry of Environment's subsidy reform plan reflects whether a nationwide direct maintenance network has been established and the contribution to charging infrastructure as key indicators. If Chinese native brands enter directly, they will struggle to build a dense maintenance network in a short period, inevitably facing penalties for 'subsidy deductions due to insufficient A/S.' However, by sharing the robust maintenance and sales networks of existing mid-sized companies like Korea GM, Renault Korea, and KGM, these deduction factors can be easily bypassed.

The stringent certification barriers encountered by pioneering Chinese brands such as BYD and ZEEKR during their market entry into Korea also served as a catalyst for adopting the indirect strategy. Concerns over connected car security led to significant delays in passing the Cyber Security Management System (CSMS) certification from the Ministry of Land, Infrastructure and Transport. Furthermore, they faced hurdles from the world's strictest Ministry of Environment certifications and radio wave law regulations, resulting in core specifications such as advanced LiDAR and driving assistance systems being largely excluded or downgraded. They realized that pursuing an independent path would be insufficient to overcome the regulatory barriers layered upon Korean consumers' expectations.

Moreover, to meet the detailed requirements for subsidy disbursement, linkage with domestic manufacturing and assembly lines is essential. With the limitations of independent entry becoming increasingly clear, alliances between mid-sized Korean companies and Chinese brands are expected to accelerate further. Korea GM will launch the Buick brand in the country on the 30th. While this may be another strategy to escape the current domestic sales slump, it remains unclear whether this was a self-chosen move or influenced by SAIC-GM's pressure.

If the intention was to introduce new brands as a way out of the struggling situation, concerns arise that long-term technological independence in Korea's automotive industry could be undermined. Additionally, industry attention is focused on how these indirect strategies, aimed at overcoming the triple difficulties of massive certification delays and subsidy cuts, will impact the future landscape of the domestic finished vehicle market.

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*This content was translated by AI.