Wider electric car adoption seen driving auto sales in South Korea: Fitch

Fitch expects vehicle sales in the country to rise by an average of 2.5% each year through 2032.

South Korea’s vehicle sales is projected to rebound by 3.3% growth in 2023 on the back of a widening adoption of electric vehicles (EVs) and improving supply, Fitch Solutions said in a report.

Fitch expects total car sales to reach just under 1.8 million this year and recover from the 1% dip in 2022, buoyed by a 28.5% anticipated rise in EVs and tempered by a flat growth of 0.9% in gasoline-powered cars. 

“We believe that the continued government support for EV adoption, improved supply of new vehicles and the delayed vehicle orders from 2021 and 2022 will drive South Korea's vehicle sales (in 2023),” it said.

The fast-growing EV sector, however, is facing near-term headwinds as the high debt levels of the country and risk of further government spending cuts could slow Korea’s vehicle electrification momentum.

For the coming decade, Fitch expects the country’s total vehicle sales to grow at an average annual rate of 2.5% between 2023 and 2032 as long-term outlook for EVs remain bullish. EV sales are poised to grow an average of 18% each year during the same period.

“We maintain an upbeat outlook for vehicle sales in South Korea over the long term, supported by the government's pressure and incentives to cut transport emissions, as well as the technology race with other nations to fuel local EV adoption (including fuel cell electric vehicles),” it said.

With EV sales poised to grow an average of 18% each year through 2023, it estimated the yearly volume units sold could jump by over sixfold to hit 825,000 units by 2032 from the estimated 143,000 sales this year. This would bolster the country’s EV penetration rate to 36.9% by 2032, more than triple the projected 10.8% rate this year.

For the non-EV segment, Fitch said long-term driving factors for the sector are the alternative or zero-emission fuels currently being developed.