This article addresses the effect of government R&D policies on the development of Korea's automobile industry, particularly in relation to technological upgrading. The automobile industry is a highly value-added, technology-intensive industry that generates many good job opportunities. In addition, it is linked to various industries. Korea developed its own car model in the mid-1970s and since then Korea's automobile industry has continued to develop. Effective government policies have played a significant role in its remarkable success. This article provides policy suggestions for developing countries intending to develop their own automobile industries.