“Can Tesla’s Giga Factory Really Come to Korea?”
On the 23rd of last month, President Yoon Seok-yeol and Tesla CEO Elon Musk had a video conference. Tesla’s domestic community was upset by the ‘surprise news’. In response to President Yoon’s request to build a Tesla gigafactory in Korea, Musk replied, “We consider Korea as one of the best investment candidates.” This news reached foreign media and attracted great attention from Tesla investors and fans at home and abroad.
Musk announced at a shareholder meeting in August that he plans to build 10 to 12 new factories by 2030. Tesla is reviewing a second plant in Asia, which aims to produce 1 million to 1.5 million units a year, and it’ n intend to publish it during the first half of next year. Given that China’s current Giga Shanghai production capacity is 1 million units per year, the new plant is expected to be of a similar size.
“Asia’s 2nd factory, decided in the first half of next year”
One of Tesla’s risks is over-reliance on China. According to Morgan Stanley, the Chinese market accounts for 30% of Tesla’s sales and more than 50% of its profits. As the conflict between the US and China escalates, Tesla needs to diversify this risk.
Four countries, Korea, Indonesia, Malaysia, and Thailand, are likely candidates for the second plant in Asia. All of these countries are very interested in attracting Tesla factories. In May, Indonesian President Joko Widodo visited the SpaceX launch site in Texas, USA, and met Musk in person. The ‘B20 Summit’, where Musk gave a video speech last month, was also held in Bali, Indonesia. In Korea, too, President Yoon repeatedly expressed his strong will to attract the request, saying in an interview with Reuters on the 29th of last month, “We will provide modified support.”
Goyang, who went to kindergarten in one day
As even the president drags his feet and jumps into the bid to attract ‘Giga Korea’, local governments in Korea are also on the move. Goyang-si, Gyeonggi-do, took the lead. The city, as if waiting for the video meeting between President Yoon and Musk a day later, launched a publicity campaign, saying, “Goyang is the best place for a giga factory.” An official from the Goyang City Corporate Attraction Team explained, “In order for Bedtown Goyang to grow into a self-sustaining city, it is essential to attract companies.”
The advantage of Goyang City is that it is a metropolitan city with the highest demand for electric vehicles. The population behind it is 20 million people in the metropolitan area, such as Seoul, Gyeonggi, and Incheon, with a population of 1 million in Goyang. It is also easy to recruit the ‘top talent’ that Musk wants. Just as there are Giga Factories near big cities like Shanghai, China and Berlin, Germany, the logic is that it is reasonable to set up Giga Factories in Goyang, near Seoul. Goyang is close to Incheon / Gimpo International Airport, Incheon Port / Pyeongtaek Port, and has a convenient transportation network for import and export.
However, there are things that hold the ankle because this is the capital area. Relatively expensive land prices and regulations. Although it is a site in Giga Shanghai, it is 257,000 pyeong. Compared to other states, it is inevitably at a cost disadvantage. An alternative to Goyang City is to designate a free economic zone. Free economic zones give tax breaks and deregulation benefits to certain areas to attract foreign investment capital. Goyang City’s strategy is to achieve free economic zone designation and Tesla attraction.
An official from Goyang City said, “The Tesla factory is in the process of being built within the Free Economic Zone,” and “the site applicant can never be revealed.” However, he said, “Because the Giga Factory is so big, the vacant land for the factory is only 2-3% of the total site in Goyang.”
Gangwon “We do business with Tesla.“
Some local governments seem uncomfortable with the announcement of the fast-paced city of Goyang. Gangwon-do. Gangwon Governor Kim Jin-tae said in a press conference on the 28th of last month, “I will come forward to attract a Tesla factory in the province,” and “I conveyed my opinion to Tesla Korea to consider Gangwon as top priority. ” He went on to say, “Since our state has been playing (in the bidding game) for several months, the situation is different from the local governments that have come forward.”
In fact, Gangwon-do is promoting an electric car charging station business with Tesla Korea. Governor Kim met with Tesla Korea CEO Kim Kyung-ho in July and agreed to complete charging stations with superchargers and universal charging facilities for Tesla at 34 locations in 11 cities and counties in the province by the end of the next year. CEO Kim, who rarely participates in outside activities including the media, gave a special lecture on the subject of ‘The Secret of Tesla Innovation’ at Kangwon National University. However, it is not known how much influence Tesla Korea can have on the site selection for the new headquarters factory.
An official from Gangwon-do’s energy management team said, “If we build a gigafactory in Gangwon, we can use the abundant wind energy in the province.” It is a strategy to persuade Tesla, an ‘environmentally friendly company’, with clean energy as a weapon. As for the candidate site for the Giga Factory, this official also kept quiet. “The site is still at review level,” he said. “The factory cannot be built in the mountains, and it will be close to a city in the province like Shanghai or Berlin.”
A behind the scenes local government briefing
Pohang City also threw in a bid to attract. The city created a Tesla factory attraction team and delivered a letter of intent to the government on the 30th of last month. According to the business proposal, Pohang’s strength is the industrial aspect related to steel and secondary batteries. In addition to being able to receive a stable supply of steel plates for automobiles from POSCO, a secondary battery cluster, which is the core of electric vehicles, has been established. Battery cell and materials companies such as POSCO Chemical, Ecopro, Samsung SDI, and LG Energy Solutions are all concentrated in Pohang. The factory site prepares 500,000 pyeong of Yeongilman hinterland industrial complex and Blue Valley industrial complex.
Are they worried about overheating competition among local governments? The government moves quietly behind the scenes. According to some media reports, the Ministry of Trade, Industry and Energy held a briefing session on attracting local governments for two days from the 29th to the 30th of last month. Ten local governments, including Busan, Ulsan, Incheon, Gyeonggi, Jeonbuk, Jeonnam, Gangwon, and Gyeongbuk, attended the briefing. The Ministry of Trade, Industry and Energy is said to have inquired about port and land facilities, which are conditions for Tesla’s work location.
Some local community cafes that have already declared the attraction of Tesla are posting support and expectations from residents. “Now the public officials are doing some work” “Who will build the factory if you stay still” “It seems harder than going to Mars, but if you attract Tesla, there will be a price the house goes to mars” “If there is a giga factory in the neighborhood, it will be dignified” He responds. Although Tesla has not yet made any decision related to investment in Korea, the interest of local residents seems to be great. Of course, there are many concerns that “Musk didn’t say anything, but isn’t he already drinking kimchi soup?”
what are the chances
Experts believe that attracting Tesla factories in Korea will not be easy. Compared to Southeast Asian countries, which are competing countries, it is not easy to match the factory site, construction cost, and labor cost. Some are raising concerns that Korea is only receiving Musk’s ‘lip service’ and is standing as a sidekick to other candidate countries.
Kim Jun-seong, a researcher at Meritz Securities, said, “Korea’s small domestic market is a disadvantage in attracting Tesla.” However, he said, “The strong battery and secondary parts supplier ecosystem is Korea’s strength that other countries cannot follow.”
Rigid trade unions and rigid labor regulations are also holding back factors. It is noted that it will be difficult for Musk, who has only done ‘non-union management’, to accept the situation where protesters occupy the Tesla factory and close it. Governments are also aware of these problems. President Yoon said, “Korea’s powerful unions are a serious problem and we will respond harshly. If Tesla builds a giga factory, the government will do its best to support it.” It is solved with the intention of attracting even if necessary by tearing down the regulations.
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Reporter Sujeon Baek jerry@hankyung.com
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