The carbon emission of South Korea’s transport sector is still rising, which account for more than 16% of South Korea’s total emissions.^[1] Climate Transparency pointed out that South Korea’s passenger and cargo transportation needs to accelerate the pace of decarbonization, and suggested that all new car sales in South Korea should be zero emission vehicles by 2035. South Korea’s mid-term target for climate change (before 2030) has a great leading role in the development of South Korea’s electric vehicles. It also proposes stricter vehicle fuel efficiency standards and carbon dioxide emissions per kilometer standard. Another measure is to promote the development of eco-friendly vehicles (including electric vehicles, hydrogen fuel cell vehicles and hybrid vehicles). Although major car companies in Europe, America and Japan have put forward the goal of phasing out new sales of fuel vehicles, Korean car companies hasn't yet made commitments to follow their footsteps, but have proposed their own electric vehicles sale targets under the government's eco-friendly vehicle goal. According to reports, South Korea’s Hyundai Motor Group (including Hyundai and Kia) may soon announce a strategy to fully switch to electric vehicles.^[2] This article will focus on the reasons behind the current rapid growth of electric vehicles, especially the factors that affect the behavior of car buyers, and conduct a preliminary analysis of the medium and long-term development of electric vehicles in South Korea.

Ambitious goals for the development of electric vehicles in South Korea

Although South Korea’s electric vehicle sales doubled to 33,000 units from 2017 to 2018, it accounted for only 2% of new car sales, with the total deployment reaching 56,000 units; the deployment of eco-friendly vehicles in 2019 was 91,000 electric vehicles and more than 5000 hydrogen fuel cell vehicles (Figure 1). The South Korean government’s goal is to sell 153,000 electric vehicles by 2022, 270,000 electric vehicles and 60,000 hydrogen vehicles by 2025, and own 3 million electric vehicles and 850,000 hydrogen fuel cell vehicles by 2030. This means that the number of electric vehicles in South Korea in the next nine years will be nine times that of the current one, and hydrogen fuel cell vehicles will grow 21 times.

Figure 1: The deployment of electric vehicles and hydrogen fuel cell vehicles in South Korea（2015-2030）

Source：Ministry of Land, Infrastructure and Transport of South Korea；Authors Analysis

The main reasons for purchasing electric vehicles now: increased cruising range and government subsidies

Because South Korea does not have regulatory policies such as restricting travelling or registration, when Koreans choose electric vehicles, it is more the market that plays an influential role. The reasons behind the increase in electric vehicle sales after 2017 are worth paying attention to. The purchase intention of electric vehicles is usually affected by factors such as economy, technology and charging facilities. South Korea's electric vehicle sales growth in the past five years is mainly due to the first two factors. A more detailed analysis shows that South Koreans' purchase of electric vehicles is attributed to two variables, technology-driven and demand promotion. The former mainly includes cruising range, the number of alternative models and prices; the latter mainly includes car purchase subsidies and tax incentives, income levels, convenience of charging infrastructure and fuel cost savings. Among them, cruising range, car purchase subsidies, and tax incentives have a stronger stimulus effect on the increase in electric vehicle sales. In particular, cruising range is the most important variable explaining the Koreans' purchase of electric vehicles.^[3]

First-time car buyers' decisions are more affected by subsidies, while second-time car buyers will pay more attention to the performance of electric vehicles. In other words, the higher the consumers' awareness of electric vehicles, the greater demand for car performance may affect purchasing decisions. Therefore, relevant industrial policies should support the promotion of electric vehicles to the public and create more opportunities for the public to experience. This requires the government and car companies' joint effort. In addition, it is also very important to accurately convey the information that they pay special attention to or ignore from the perspective of consumers. For example, the public should be informed of the savings electric vehicles have over the life of the vehicle in reducing fuel costs compared with petrol vehicles.^[4]

In terms of charging convenience, South Korea is a leader in the OECD countries, but the development of electric vehicles in South Korea is not closely related to the development of charging infrastructure. It may be that the convenience of charging attracts consumers by guaranteeing a safe cruising range. And the penetration rate of personal charging in South Korea is very high, studies pointed out that charging infrastructure is not the main factor affecting the purchase of electric vehicles.

The diversity of models will support the rapid development of electric vehicles in South Korea in the future

Similar to China's electric vehicle subsidy policy, South Korea's electric vehicle purchase subsidies are decreasing year by year, and the mileage is due to the continuous growth of technological progress. In this context, the main factors that stimulate consumers to buy electric vehicles are also changing. The driving factors for buying South Korean electric vehicles in the future will not be government subsidies and cruising range, but the diversity of electric vehicle models among the technological variability. What needs to be noticed is that the diversity of models is not currently the main driving factor for electric vehicle sales, because the distribution of fuel vehicles in the South Korean car market shows that South Korean car buyers are more inclined to buy large size vehicles and SUV, while the main model in the Chinese market is the medium-sized sedan. ^{[5]owever, this trend is changing. The models of electric vehicles in the field of large cars and SUVs favored by South Korean consumers are gradually increasing. In addition to the efforts of local car brands, European and American brands, led by Tesla, are also occupying a larger share of the South Korean market; Tesla's sale in South Korea in the first half of 2021 increased by 64.7% year-on-year to more than 11,600 vehicles, surpassing Hyundai and Kia's electric vehicles with a market share of 43.67%} . ^[6]With more models to choose from, the sale strategies of electric vehicles in South Korea may become similar to those of petroleum vehicles, so will car buyers' decision-making process.

Figure 2：Social network analysis chart of South Korea's second-generation electric vehicles

Source：Ju, N., Lee, K. H., & Kim, S. H. (2021). Factors affecting consumer awareness and the purchase of eco-friendly vehicles: A textual analysis in Korea. Sustainability, 13(10)

A recent big data analysis on South Korean public’s discussion of electric vehicles on social platforms shows that, South Korean potential electric vehicle buyers are mainly searching for keywords related to vehicle models (Figure 2), when considering buying electric vehicles, such as model, SUV, hybrid and diesel vehicles. It also reflects that they pay more attention to the comparison with fuel vehicles and available models before buying a car. In addition, South Koreans also paid more attention to the discussion of South Korean local brands, the application of new technologies, batteries, and hydrogen fuel. At the same time, the figure above also shows that there is a strong correlation between the new vehicle launch trend and considerations for purchasing electric vehicles. The more frequently a new model of electric vehicle releases, car buyers are more likely to consider switching from fuel vehicles to electric vehicles or replacing existing electric vehicles.  South Korean government set such an ambitious goal for the development of electric vehicles, may have calculated and predicted the increase in sales caused by the diversity and abundance of electric vehicles in the future. Europe, the United States and Japan have successively announced milestones in the development of electric vehicles, which are driving South Korea to make more commitments. Under such circumstances, car companies will inevitably choose to launch new models more frequently to attract more potential car buyers.

Conclusion: It may not be far away for electric vehicles to become mainstream in the South Korean new car market

The South Korean government has set a development goal of 3.85 million eco-friendly vehicles by 2030. This is a boost for South Korean transport sector’s low-carbon transition in the next decade and even the future goal of net zero emissions. It will not only promote the domestic car companies to increase the input on research and production of electric vehicles, but also open the scene of competition between car companies from South Korean and abroad.

For South Korea’s future electric vehicle market, the competitiveness of electric vehicles will come from the advantages they have compared to fuel vehicles. Electric vehicles must provide consumers with more value than fuel vehicles in order to win more consumers, like smart car systems, being environmental and health-friendly, and fuel cost savings. When the value provided by electric vehicles is greater than what consumers expect from traditional fuel vehicles, or the extra value of electric vehicles is large enough to offset the reliability problems faced by emerging technologies, fuel vehicle owners will naturally turn to electric vehicles and it will gradually become the mainstream. The challenges for electric vehicles in South Korea in the future are bridging the gap in the availability of model types comparing to fuel vehicles, after subsidies are withdrawn, and strive to attract more potential consumers by showcasing the advantages of electric vehicles over fuel vehicles.

Note：

[1]《磐之石能源评论2019》中国能源转型——交通低排放之路。链接：http://www.reei.org.cn/publication/743

[2] Hyundai to slash combustion engine models to focus on EV investment. REUTERS Blog onMay 27, 2021. Link:https://www.autoblog.com/2021/05/27/hyundai-ev-investment-slash-combustion-engines/

[3] Kim, Eunsung & Heo, Eunnyeong. (2019). Key Drivers behind theAdoption of Electric Vehicle in Korea: An Analysis of the Revealed Preferences.Sustainability. 11. 6854. 10.3390/su11236854.

[4] Park, J., Kim, H., & Kim, C. (2019). Understanding Electric Vehicle Consumer in Korea Market Based Upon Userand Prospective Survey. Journal of theKorea Convergence Society.10 (6), 191–201. https://doi.org/10.15207/JKCS.2019.10.6.191

[5] International Energy Agency (IEA). Fuel Economy in Major Car Markets:Technology and Policy Drivers 2005-2017; IEA: Paris, France,2019.

[6] Tesla captures nearly half of Korean electric vehicle market. July 15,2021, UPI. Link: https://www.upi.com/Top_News/World-News/2021/07/13/skorea-Tesla-electric-vehicle-sales-South-Korea/5211626204342/

Author：Jiaqiao Lin、Shikai Chen（intern）

Translation: Chen Shikai

Proofread: Pan Yiren

This article is an original article of the Rock Environment and Energy Institute. Please contact us to obtain the appropriate authorization to reprint. For cooperation and authorization, please send an email to: liying@reei.org.cn

* This is the translation of an article in Chinese. Should there be any inconsistency between Chinese and English version, the Chinese version shall prevail.