Tesla CEO Elon Musk shared the news last month on his social media platform X that Tesla's Model Y had become the top-selling car in Korea. In May sales, the Model Y edged out all popular domestic models, including Hyundai Motor's (005380) Grandeur and Kia's (000270) Sorento, to take the lead in the local market. In his post, Musk wrote that "a historic moment has come in the home turf of Hyundai and Kia," and that "roughly one-third of all imported cars sold in Korea this year were Teslas, something no imported car model has ever achieved."
He also posted "Korea is awesome" alongside several Korean flag emojis, heaping praise on Tesla's Korean customers. With Tesla's standing weaker than before in key markets such as China and Europe, it seemed he was deeply grateful for Korea's exceptional "love for Tesla."
Less than a month after Musk's expression of thanks, on the first of this month, Tesla Korea abruptly raised the prices of major trims of the Model Y and Model 3 by up to 7 million won. This came just one day after the government selected Tesla as a recipient for its electric vehicle subsidy program in the second half of the year. In effect, the tax money the government provided to ease consumers' burden was pocketed by Tesla through the price hike. On automobile community forums and elsewhere, reactions poured in such as "Didn't they take the Korean government and consumers for suckers?"
Despite consumer complaints, Tesla appears set to continue its dominance. With advanced autonomous driving technology and cost competitiveness secured through its manufacturing base in China, Tesla is becoming increasingly difficult for domestic automakers to counter. In fact, Hyundai Motor, the longtime fixture of the Korean market, saw its domestic sales in the first half fall by more than 10 percent compared with last year.
As Hyundai launches aggressive promotions to make up for the slump, the "big three mid-tier" companies, including KG Mobility (003620), are in dire straits. Renault Korea, based in Busan, closed for half of its business days last month amid a severe sales downturn.
There is nothing to fault in Tesla's management strategy of building brand power through technological innovation ahead of the pack. Still, it is not something the government should encourage with subsidies — this behavior of deceiving consumers after shouting that "Korea is awesome" and then turning away. If national funds injected to expand electric vehicle adoption are shaking the foundation of the domestic auto industry, this too is worth reconsidering.
