Chinese EVs Advance in South Korea, but Face Tougher Going in Japan

BYD and other Chinese automakers have set their sights on the South Korean and Japanese markets. Sales are growing fast in the former, while in the latter the companies are meeting stiff resistance.

A 48-year-old Seoul resident says he bought a Chinese-made electric vehicle. According to him, the people around him reacted like this: “Why did you buy a Chinese car? Are you trying to get yourself killed?” Such a choice would have been unthinkable in South Korea just a few years ago, as Chinese cars were long considered poor in quality.

The BYD Dolphin compact, selling for about $18,500, was cheap, well equipped and, most importantly, available. The buyer initially wanted a Hyundai (005380.KS). He turned to the Kasper EV, but was told he would have to wait more than two years for delivery.

After expanding rapidly in Europe and other markets, BYD and other Chinese manufacturers are now turning to South Korea and Japan. In both countries the auto industry is deeply rooted and a considerable share of consumers are skeptical. Chinese companies are making headway in South Korea, while in Japan sales are weak.

The difference is partly down to the popularity of electric vehicles. According to industry data, roughly a quarter of new cars sold in South Korea this year are electric. In Japan, the figure is just 3%.

Industry executives and analysts note that Chinese manufacturers have shown they are willing to spend years building dealer networks and adapting vehicles to local tastes. The strategy stems from both confidence and necessity. China produces some of the most technologically advanced cars at prices its rivals struggle to match. But its domestic market is so crowded with brands that companies have to look abroad for growth and profit.

“They enter first, watch what happens and gradually adjust their strategies,” said Liao Jingnan, founder of Tokyo-based consultancy MobyInfo.

Reuters interviewed more than ten people for this article in both countries, including company executives, dealers and EV buyers.

Progress in South Korea

According to market research firm Carisyou, BYD sold more than 20,000 vehicles in South Korea in the first nine months of this year, surpassing the combined sales of Toyota (7203.T) and its Lexus brand.

Lee Jae-il, chief analyst at Eugene Investment & Securities, believes BYD has been able to capitalize on South Korea’s growing appetite for cheap EVs. Gasoline prices have risen about 10% since the war between the U.S.-Israel and Iran began. Hyundai and Kia, meanwhile, focus mainly on premium EVs, offering only a few models priced below $30,000.

“The timing worked out particularly well for BYD,” Lee said.

Geely’s (0175.HK) Zeekr brand began taking orders for its 7X SUV in South Korea in June and plans to open up to 14 showrooms by the end of the year. Chery (9973.HK) is expected to enter the market in 2027, according to an industry presentation reviewed by Reuters. Chery declined to comment.

Xpeng (9868.HK), which set up a local unit in Korea last year, is now looking to hire a specialist to build its retail network, according to a LinkedIn job posting. Xpeng also declined to comment.

South Korean automakers are worried. Chung Dae-jin, chairman of the Korea Automobile and Mobility Association, has called for tax incentives for domestically produced EVs. He said automakers are “very desperate.”

The Situation in Japan Is Tougher

Japan may test the patience of Chinese manufacturers. Foreign brands account for just 6% of passenger car sales, and drivers prefer Toyota-backed hybrids.

Relations between Tokyo and Beijing have grown strained since last year. Prime Minister Sanae Takaichi, a right-wing leader who has taken a harder line on China, is in power. According to a Pew Research Center survey, about 88% of Japanese and 71% of South Koreans hold a negative view of China. A spokesperson for BYD Auto Japan said diplomatic tensions have had no particular effect on the company’s sales, showroom visits or customer inquiries in Japan.

BYD, which began selling cars in Japan in 2023, has more than 75 dealerships and aims to reach 100. In the first nine months of the year, the company sold fewer than 4,000 vehicles in Japan, which amounts to a market share of just 0.1%.

In July, BYD introduced a box-shaped EV in Japan’s “kei” mini-car segment, which is dominated by domestic makers. As of September, only 650 of that model had been sold. Even so, BYD’s overall sales in Japan are rising every year.

“It’s not about market share,” said Mark Yamada of consultancy Alvarez & Marsal. “It’s about growth.”

Chief Technology Officer Koji Yamamoto told Reuters that EMT, a startup backed by Chery, plans to launch its kei model in the first half of 2027 and three more models by 2029. According to him, the company aims to build cars in Japan by the 2030s.

Hiroyasu Koma, CEO of folofly, Zeekr’s distributor, said Zeekr plans to introduce a luxury minivan in Japan, initially targeting taxi fleets and chauffeur services.

One person who won’t be buying a Chinese car is Fumio Kuwabara, who has driven Japanese EVs since 2010. He said he does not trust the reliability of Chinese cars.

“I feel like there are problems in places you can’t see,” he said.

Daishiro Yamagiwa, a lawmaker from the ruling party, told Reuters that Japan must consider the security risks posed by Chinese cars that can be controlled remotely from outside the vehicle.

Whether Japanese consumers will, like South Korea’s Lee Song-dong, drop their wariness remains to be seen.

“Honestly, I didn’t have a good idea about Chinese cars either,” said Lee, a content creator who bought a Dolphin in Seoul.

“Seeing and driving the car in person changed my thinking quite a bit,” he said.