South Korea’s 8% tariff on Chinese EVs draws scrutiny as imports gain market share
South Korea’s auto industry is seeking a production tax credit as Chinese-made electric vehicles rapidly expand their domestic market share. The country applies an 8% tariff to Chinese passenger cars, compared with China’s 15% levy on South Korean vehicles and substantially higher barriers in the US and EU.
Industry seeks support tied to domestic production
South Korea’s automotive industry is pressing for an electric-vehicle production tax credit as lower-priced vehicles made in China gain ground in the domestic market. At a National Assembly seminar on the 18th, the Korea Automobile & Mobility Association (KAMA) and the Korean Society for Mobility called for support directly linked to domestic output, according to Maeil Business Newspaper.
The debate reflects a widening contrast between South Korea and other major vehicle-producing economies. South Korea applies an 8% tariff to Chinese passenger cars, below the 15% tariff that China imposes on South Korean vehicles. The country also has no separate production tax credit for domestically manufactured EVs.
By comparison, the United States applies tariffs of up to 127.5% to Chinese EVs, while the European Union’s maximum rate is 45.3%. Japan combines consumer subsidies with tax credits linked to production and an economic-security fund covering one-third of capital investment. As of March this year, Japan had allocated up to ¥671.1 billion, approximately Won6.3 trillion, to finished vehicles, materials and equipment.
Chinese-made vehicles capture 35.3% of EV sales
KAMA data show that South Korean EV sales reached 235,000 units from January through July this year, an increase of 99.3% from the same period a year earlier. Sales of Chinese-made EVs rose 148.9% to 83,000 units, substantially outpacing the wider market.
Vehicles made in China, including Tesla models shipped from Shanghai, accounted for 35.3% of South Korean EV sales, up from 12.6% in 2023. BYD became the country’s fourth-largest EV brand by sales. The figures mean that changes in tariffs or support rules would affect not only Chinese brands but also manufacturers using Chinese plants to supply South Korea.
Chinese brands are also expanding despite stronger barriers elsewhere. Their share of European new-car registrations increased from 4.5% in the first half of 2025 to 11.2% in July this year, even with tariffs reaching 45.3%. Chinese automobile exports between 2020 and 2025 increased 12.1-fold to Russia, 8.1-fold to ASEAN, sixfold to Latin America and 5.3-fold to the Middle East.
Tax credit proposal raises cost and investment questions
South Korean automakers argue that a credit proportional to domestic EV output would help narrow the production-cost gap. Unlike purchase subsidies, they say, production support would directly stimulate local vehicle and component demand while supporting factory investment, supplier employment and regional economies. KAMA executive Yoon Kyung-sun also called for purchase subsidies to remain in place over the medium to long term, with stronger differentiated support for locally produced vehicles.
Park Jeong-gyu, a visiting professor at KAIST’s Graduate School of Management of Technology, warned that a market without defensive instruments could be overtaken within one or two years. Hyundai Motor chief executive José Muñoz separately pointed to the UK, where he said the top-selling vehicles were all Chinese brands, and argued that the US should impose conditions on Chinese companies to limit disruption. For South Korea, policymakers must weigh consumer access to competitively priced EVs against the effects of an 8% tariff and the absence of production-linked support on domestic plants, suppliers and future investment.