New Car Prices Soar Due to Sharp Rise in Raw Material Costs

Consumer Burden Increases as New Car Prices Rise

[Asia Economy Reporters Changhwan Lee, Daeyeol Choi] The sharp rise in raw material prices is also having a significant impact on the automobile market. As the prices of key automotive materials such as steel, semiconductors, and batteries increase, new car prices are also rising sharply.

According to the automotive industry on the 7th, the average price of passenger cars from Hyundai Motor Company in the first half of this year was 43.99 million KRW, up 5.1% from 41.82 million KRW last year. Compared to 37.74 million KRW in 2019, it rose by 16.5%. Not only Hyundai but also major domestic and foreign automakers such as Mercedes-Benz, BMW, and Ssangyong Motor have been raising new car prices one after another this year.

The situation is similar in overseas markets. As of August, the new car Consumer Price Index (CPI) in the United States recorded 158.6 points, up 0.9% from the previous month. This is the highest level since related statistics began in 1947. Major automobile companies in Japan and Europe have also significantly increased vehicle prices this year.

The rise in car prices is due to the sharp surge in raw material prices. Domestic steelmakers such as POSCO and Hyundai Steel raised the price of automotive steel sheets by 50,000 KRW per ton in the first half of the year. This is the first increase in automotive steel sheet prices in four years since the second half of 2017.

The increase in automotive steel sheet prices is due to the sharp rise in the price of iron ore, a raw material. Iron ore prices, which were below 100 dollars last year, exceeded 200 dollars at one point this year, rising significantly.

The price of automotive semiconductors, which continue to face supply shortages, is also rising. Taiwan's TSMC, the world's largest semiconductor foundry, raised prices for automotive semiconductors by about 20% this year. Other semiconductor companies such as the Netherlands' NXP and Switzerland's STMicroelectronics have also increased prices.

It is known that a 10% increase in semiconductor prices raises automobile production costs by about 0.18%, reducing the profitability of automakers. The recent supply shortage of automotive semiconductors, which started in Southeast Asia, is expected to continue until next year, indicating a high possibility of further price increases.

KB Securities researcher Seongjin Kang explained, "Although Malaysia's lockdown measures are being gradually lifted from October, it is known that orders have been delayed by 2.5 months since June," adding, "The semiconductor shortage problem is unlikely to be resolved within 2021."

Battery prices are also a burden. According to export-import statistics from the Korea International Trade Association, the import price of lithium-ion batteries in the United States was 28,175 dollars per ton as of August, up more than 10% from 25,417 dollars in May. The United States is the largest battery importer in the world, and while monthly fluctuations are common, such a rise is unusual.

An industry official said, "As raw material prices for automobiles rise, automakers have no choice but to raise car prices," adding, "As car prices increase, the burden on consumers is also growing."

This content was produced with the assistance of AI translation services.