Electric Cars, Now a Bold Business... Will Things Stay the Same After 1 or 2 Years?

Tesla and Hyundai Raise Vehicle Prices
Raw Material Cost Surge Immediately Reflected in Car Prices
Supply < Demand Continues... Manufacturers Hold Advantage
Concerns Over Inflation and Recession Grow, Demand Enters Ice Age
Interest Rates and Electricity Costs Rise, Increasing Consumer Burden

Tesla vehicles lined up at an exhibition hall in California, USA

[Asia Economy Reporter Choi Dae-yeol] Tesla, the world's largest electric vehicle manufacturer, has raised its domestic sales prices again. This comes just over a month after the previous increase.

As of the 16th, according to Tesla Korea's website, the Model 3 Long Range is priced at 84,697,000 KRW, up 1,180,000 KRW from the previous price. The base Rear-Wheel Drive model (70,340,000 KRW) and the high-performance Performance model (94,175,000 KRW) saw a price increase once at the end of last month but remain unchanged this time.

For Tesla's entry-level Model 3, the price has increased by nearly 15 million KRW compared to the beginning of this year. In just over half a year, this is equivalent to adding the price of a compact car while sitting still.

The Hyundai Ioniq 5, the best-selling electric vehicle in Korea during the first half of the year, also saw a price increase of 4.3 million KRW (3.1 million KRW for the base model) following a model year update. Additionally, prices for key optional features have increased by several hundred thousand KRW each, resulting in an actual increase of 5 to 6 million KRW for buyers.

In April, Ahn Cheol-soo, then Chairman of the Presidential Transition Committee, visited Hyundai Motor Group's Technology Research Center to receive an explanation about the Hyundai Ioniq 5 Robotaxi.

The Ioniq 5 currently has a waiting period of over a year even if ordered now. Customers who have reserved vehicles without a set delivery date must pay the increased price to maintain their existing queue position. On online communities, several potential buyers have expressed their intention to cancel contracts, citing the burden of the higher prices.

The price hikes are due to rising raw material costs. In particular, battery prices, which are directly linked to electric vehicle performance, have increased significantly. Lithium, one of the key battery raw materials, has become more than five times as expensive compared to a year ago. Prices for nickel and cobalt have also risen considerably. This is due to increased battery demand centered on electric vehicles.

The supply-side 'advantage' market, caused by production disruptions due to parts shortages since COVID-19, has persisted for several years, further fueling price increases. Production disruptions have affected not just one or two companies but all automobile manufacturers worldwide simultaneously, resulting in a supply shortage far exceeding market demand for over two years.

Because vehicle supply is absolutely insufficient compared to demand, there is a perception that buyers will purchase vehicles even at high prices. This is why manufacturers feel less burdened raising prices even when launching new electric vehicles.

Electric SUV from Indian automobile company Tata Motors

Electric pickup truck R1T made by American electric vehicle startup Rivian

It is generally known that new car development takes four to five years and costs billions of won, but there have been ongoing discussions inside and outside Hyundai Motor Company that this year will be the point when electric vehicles start generating profits. This means favorable conditions for sales strategies have continued for a long time. The rapid establishment of high-priced vehicles was also greatly supported by subsidies exceeding 10 million KRW per new car.

The future market outlook is not very optimistic. With steep inflation and growing concerns about an economic downturn, consumers are likely to tighten their wallets. Installment interest rates have also increased by about 1 percentage point compared to early this year, adding to the burden of already high new car prices. It's not just the vehicle prices that are rising. The abolition of special discounts on charging fees has effectively resulted in a price increase. Among electric vehicle users, resentment has grown this month against a service provider that significantly raised charging fees.

The impact of parts shortages, including semiconductors, is expected to continue until next year due to prolonged conflicts and other factors. In this situation, there is a growing possibility that demand, which has supported the market so far, will shrink, leading to a survival-of-the-fittest period. While abundant funding has led to a flood of electric vehicle development competition, it is now expected that those who fall behind or drop out will become clearly apparent.

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