Chinese automakers turn to South Korea as export hub
· UPIAug. 3 (Asia Today) -- South Korea is emerging as a potential production and export base for Chinese automakers facing intense competition at home and higher trade barriers in the United States and Europe.
Chinese companies are increasingly turning to investments, joint development and local production partnerships rather than relying solely on exports or acquisitions of overseas brands.
Chery Automobile has made a strategic investment in South Korean automaker KG Mobility, while Geely has used its partnership with Renault Korea to produce vehicles for global markets.
Industry officials said Monday that the partnerships could allow Chinese automakers to use South Korea's manufacturing infrastructure, engineering capabilities and international sales networks while reducing the cost and time required to enter overseas markets.
KGM said Monday that it would issue 108.1 billion won ($75 million) in convertible bonds to Chery Global Innovations, an affiliate of Chery Automobile.
If the bonds are converted into shares, Chery would acquire a stake of about 10% in KGM.
The transaction follows a strategic investment agreement signed in July.
The companies plan to expand their cooperation in software-defined vehicles, autonomous driving and electrical and electronic vehicle architecture.
Their first jointly developed model will be the SE10, a large sport utility vehicle scheduled for release in January 2027 as a successor to KGM's Rexton.
The investment is officially intended to support joint vehicle development. Industry observers, however, said Chery may also be considering longer-term access to South Korean production facilities and global supply networks.
Chery President Zhang Guibing said the companies could consider a partnership that jointly uses their global production capacity.
"Cooperation can benefit both sides in regions where tariff conditions differ between vehicles made in China and South Korea," Zhang said.
Geely has already established a significant presence in South Korea.
The Chinese automaker owns 34.02% of Renault Korea and is its second-largest shareholder.
Renault Korea's Busan plant produces the Polestar 4 electric SUV for export to North America. Polestar is controlled by Geely, which also owns Volvo Cars and Lotus and holds a stake in Mercedes-Benz Group.
Production of the Polestar 4 in South Korea illustrates how a Chinese-controlled automotive group can incorporate a Korean factory into its global supply chain.
The change in strategy comes as Chinese automakers face rising trade restrictions.
The European Union has imposed countervailing duties on battery-powered vehicles imported from China. The United States has also maintained high tariffs on Chinese-made vehicles and parts.
Washington has separately adopted restrictions on connected vehicles using certain software and communications hardware linked to China, citing national security and data protection concerns.
Those regulations mean that assembling a vehicle in South Korea would not necessarily guarantee access to the U.S. market. The vehicle's software, components and the ownership or control of companies involved could also determine whether it is permitted for sale.
South Korea nevertheless offers several advantages as a production base, including established automotive suppliers, experienced workers, high manufacturing standards and free-trade agreements with major markets.
Industry observers are watching whether the Chery-KGM partnership will eventually expand from technology and vehicle development to production.
KGM said it has no current plan to manufacture Chery-branded vehicles under contract at its Pyeongtaek plant.
The possibility could be reconsidered if the SE10 project succeeds and the companies expand their cooperation into global production and exports, industry officials said.
Kwon Yong-joo, an adjunct professor of automotive and transportation design at Kookmin University, said the partnership addresses weaknesses on both sides.
KGM needs access to Chery's electrification technology, including extended-range electric vehicle systems, because it has limited capacity to independently develop all the technology required for future vehicles, Kwon said.
Chery, meanwhile, could benefit from KGM's South Korean production base and international sales network.
"With trade barriers rising in the United States and Europe, Chery is likely considering a strategy of working with KGM and using South Korea as a global production and export base, potentially with the U.S. market in mind," Kwon said.
-- Reported by Asia Today; translated by UPI
© Asia Today. Unauthorized reproduction or redistribution prohibited.
Original Korean report: https://www.asiatoday.co.kr/kn/view.php?key=20260804010000751