Participants experience a driving simulation at the UX Studio Seoul, which Hyundai Motor Company and Kia Motors opened at Hyundai Motor Company&#39;s Gangnam-daero headquarters in Gangnam District, Seoul, on July 3. 2025.7.2 / News1

The intensifying technological rivalry between the U.S. and China, coupled with rising protectionism, is pushing automakers to increase local production. This trend raises concerns about potential declines in domestic manufacturing and industrial hollowing-out.

At the 43rd Automotive Mobility Industry Development Forum hosted by the Korea Automotive Industry Alliance (KAIA) in Seoul on Thursday, Lee Hang-koo, a researcher at the Korea Automotive Technology Institute, stressed that the export-dependent Korean auto industry faces direct threats.

In fact, South Korea, which ranked as the world’s fifth-largest automobile producer in the early 2010s, slipped to seventh place as of last year, having been overtaken by emerging markets such as Mexico and India.

Lee identified several factors diminishing the automotive industry's competitiveness, including: the widening gap between automakers and parts suppliers; the concentration of talent in the Seoul metropolitan area and the brain drain to overseas markets; lagging autonomous driving technologies; and the slow transition to software-centric components.

Jeong Man-ki, chairman of the Korea Industry Alliance Forum, noted that research and development capabilities are becoming increasingly crucial, especially for electric and autonomous vehicles, observing that major countries are leveraging their strengths to navigate the transition to future mobility.

Jeong also pointed out that while Korea excels in electrification technology, it urgently needs to address its shortcomings in autonomous driving and reduce its heavy dependence on specific nations within its supply chain.

To tackle these challenges, Jeong proposed several measures: increasing labor market flexibility, shifting to a software-centric research and development (R&D) structure, localizing global strategic hubs, and adopting regulatory reforms to facilitate autonomous vehicle testing and commercialization.

Song Jun-young, a team leader at Hyundai Mobis, introduced the company’s artificial intelligence (AI) transformation (AX) strategy, which is aimed at enhancing competitiveness in automotive mobility production.

Song explained that through the AX strategy, Hyundai Mobis intends to slash R&D costs by over 50% while leveraging multimodal AI to dramatically boost its R&D capabilities and secure a competitive edge in the future mobility market.

Kang Nam-hoon, chairman of the KAIA, called for more proactive and comprehensive measures to address the industry’s multifaceted challenges, including weak domestic demand, tariff burdens, and slowed investments.

He emphasized that, as major markets like the U.S., the European Union, and Japan implement robust policies to protect their domestic industries, South Korea should introduce tax incentives to boost local production and expand tax credits for strategic technologies related to future vehicles.

The intensifying technological rivalry between the U.S. and China, coupled with rising pro …

South Korea’s Auto Industry Is Being Hollowed Out—And No One’s Sounding the Alarm