Tesla Finds Hope in South Korea’s Luxury Car Market

Business

It took me a while to find the nearest Tesla Supercharger from my office in Seoul’s Daehak-ro district. Following instructions on Tesla’s website, I took a bus for three kilometers to an address at “33 Jongro, Jongro-gu,” which turned out to be an empty lot sandwiched between shiny corporate towers. After circling around the nearby parking lots, it hit me that the station might be underground, and it was — down in the sixth basement level of one of the towers.

As of February 2018, 10 months after launching in South Korea, Tesla Inc. has already set up 145 charging stations in the country, according to the company. 14 of these are superchargers, which speed up the charging time from 5 hours to 75 minutes.

South Korea is a potentially valuable market for Tesla, the world’s most prominent electric car company. The country’s air pollution is terrible — which could play to Tesla’s advantage — and foreign players have traditionally done well in the luxury automobile market.

“South Koreans tend to buy cars from credible brands. [Wealthy] South Koreans are especially loyal to three German brands — BMW, Audi and Mercedes-Benz,” Kim Bum-joon, a researcher at LG Economic Research Institute, told Korea Exposé.

German carmakers BMW and Mercedes-Benz sold more cars in South Korea than in neighboring Japan during the first four months of 2017. South Korea consistently ranks within the top five countries worldwide for sales of high-end models such as Daimler AG’s Mercedes-Benz S-Class and BMW’s 7 series.

In January 2018, imported vehicle sales grew by 8.7 percent year on year to 21,075 units, accounting for about 15.8 percent of new vehicle sales in South Korea. The top three best-sellers in the same month were Mercedes-Benz E300 4MATIC, BMW 520d, and Mercedes-Benz E200 sedans, according to IHS Automotive.

Coupled with recent changes in local subsidy rules — including scrapping a regulation that denies subsidies for electric vehicles with high-capacity batteries (e.g. Tesla) — this could make the Korean market a promising scene for Tesla. There are signs that the company is trying to expand more aggressively: It has installed numerous charging stations in South Korea on par with other large Asian economies with a lot more Tesla drivers in the country.

Tesla offers no figures on the number of cars sold worldwide. But it has been reported that more than 2,000 Tesla Model S were sold in Japan, with similar reported sales in Hong Kong (with the caveat that these figures are a couple of years old and cannot be be backed up with data from Tesla itself). In 2017, various media reports put the number of Tesla Model S sold in South Korea at around 303 that year (Tesla Korea declined to offer an exact figure).

Yet just 10 months after launching in South Korea, Tesla has almost as many charging stations in the country as it does in Japan and Hong Kong: 14 supercharger stations as opposed to 17 in Japan and 20 in Hong Kong (in case you wanted to know, the rest of mainland China has a lot, according to the Tesla website). 

“Tesla came into South Korea when there was lack of electric vehicle infrastructure. This is why the company is expanding its network of superchargers there more actively than in other countries,” said an automobile industry source with direct knowledge of Tesla.

“Tesla may be thinking that it can occupy the electric vehicle market if it goes in now,” said Jung Yong-jin, an analyst at Shinhan Investment Corp.

Researcher Kim Bum-joon speculated that there may be an experimental aspect to Tesla’s Korean expansion, saying, “South Korea’s market is not too big and not many people drive electric vehicles. This just seems like a test bedding for Tesla.”

Tesla isn’t South Korea’s most popular electric car yet: During the first half of 2017, Hyundai’s Ioniq Electric was the highest-selling electric vehicle in country. Tesla is not even among the top five brands when it comes to electric vehicle sales in South Korea, according to various media reports.

For now, if Tesla is trying to expand more aggressively into South Korea, the low number of Tesla drivers in the country raises questions about imbalances between supply and demand.

 

Photos by Juwon Park for Korea Exposé.

Juwon is a journalist at Korea Exposé covering all things business. She’s previously worked as a TV producer in Channel News Asia in Singapore and has interned for Bloomberg, AP and Google. Juwon is a proud owner of her dog Noah and a graduate of Journalism and Media Studies Centre at the University of Hong Kong.