In the first half of 2026, the leading country for imported cars in South Korea is not Germany, but China.
During this period, 69,513 electric vehicles from China were imported, marking a staggering 178.7% increase compared to the same period last year. The market share of imported cars from China reached 41.2%. Just three years ago, in 2022, the share of Chinese vehicles in the domestic import market was only 3.5%. This figure surged to 37.2% in 2025 and further climbed to 41.2% in the first half of 2026. When it comes to electric vehicles, the share is even higher at 72.1%, meaning that seven out of ten electric cars sold are from China. Given these numbers, one might suspect statistical errors, but this is the undeniable reality, and the pace of change is accelerating.
They arrived quietly and grew faster than expected.
In April 2025, BYD's compact electric vehicle, the Dolphin, entered the domestic market with a price tag of 24.5 million won. The automotive community buzzed with excitement, and social media was flooded with test drive reviews. The evaluations exceeded expectations, with many stating, "It’s much better than I thought." The result was that within just 11 months, cumulative sales surpassed 10,000 units, setting a record for the fastest sales in the history of the import car market since its opening in 1987. This achievement was accomplished in one-third of the time it took Tesla to reach the same milestone. In the first half of 2026, BYD alone sold 11,675 units, reflecting an 807.9% growth compared to the previous year.
The electric bus market was penetrated even earlier and more deeply. A representative from a bus company in Seoul shared, "When I went to buy electric buses, there were only Chinese options available." During the 2023-2024 subsidy season, many sought domestic options but ended up signing contracts for Chinese models. With prices at half, similar performance, and identical subsidies, this outcome was logically inevitable. For a time, 100% of imported electric buses were from China. Although a late adjustment in subsidy policies has allowed for some recovery in market share, regaining lost ground will take time.
In this process, an unexpected pioneer emerged: Tesla. A significant portion of the Tesla Model 3 and Model Y sold in South Korea is produced at the Shanghai Gigafactory, and statistically, these are classified as 'Chinese-made.' Consumers have naturally accepted Chinese-made Teslas, breaking down their own biases against Chinese products. Inadvertently, Tesla has provided entry tickets for BYD and other Chinese brands. Additionally, as domestic passenger car sales in China plummeted by 20.2% in the first half of 2026, Chinese companies began to shift their focus to overseas markets, including South Korea, in what is termed 'push-out exports.' The Chinese state-run English media outlet China Daily proudly reported this situation as evidence of the competitiveness and export resilience of China's electric vehicle supply chain. What we perceive as alarming statistics, they promote as achievements.
Rational consumers, vulnerable structures — things that need to change immediately.
The decision of consumers to choose Chinese electric vehicles is rational. They offer better specifications, lower prices, and the same subsidies. It is an unassailable choice. However, economics introduces the concept of 'market failure,' where the rational choices of individual economic agents lead to suboptimal outcomes for society as a whole. If subsidies for electric vehicles funded by taxpayer money are accelerating the establishment of Chinese companies in the South Korean market, then the structure itself needs to be addressed.
A deeper issue is the supply chain risk. The 72.1% dependence on imported electric vehicles is not merely a market share statistic. It represents a structural vulnerability that could shake South Korea's electric vehicle supply chain if tensions rise in Korea-China relations or if China decides to restrict exports for strategic reasons. We have already experienced this with China's rare earth export restrictions in 2010 and the THAAD-related ban in 2017. Economic interdependence does not always lead to peace and cooperation; we know this from experience, not just data.
The direction for response is clear. The United States manages Chinese electric vehicles with 100% tariffs and the Inflation Reduction Act, while Europe imposes a 35% additional tariff and origin regulations. South Korea, with its Korea-China FTA, has a much larger opening than its competitors, yet tax incentives for domestically produced electric vehicles remain stagnant. It is essential to introduce battery origin regulations in subsidy calculations and expand tax deductions for domestically produced electric vehicles. If China holds a structural advantage in hardware costs, South Korea must accelerate its efforts in software-defined vehicles and next-generation battery technologies to close the gap. Reviewing countervailing duties on China's export subsidies and utilizing the WTO are also options that cannot be overlooked.
“Crises only come suddenly to those who are unprepared.” The numbers have already sent a warning. Now, what remains is our choice.
Author's Background
▲ Current Director of the Korea-China Economic Research Institute ▲ Researcher at the National Diplomatic Academy ▲ Research Fellow at the Korea Institute for International Economic Policy ▲ Former KOTRA China Research Officer
* This article has been translated by AI.
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