Demand slowdown and price competition... Key factors determining automakers' performance

Q3 Domestic and International Automakers' Performance in Focus
Electric Vehicle Price Competition Amid Sales Slowdown Signs

During the pandemic, the soaring prices of new cars in the United States have entered a stabilization phase. According to data from market research firm Cox Automotive, the average new car sales price in the U.S. last month was $48,451, nearly the same level as a year ago. Compared to the beginning of this year, it has actually decreased by about 2.4%. This is said to be the largest drop in the past 10 years.

The sharp rise in vehicle prices over the past two to three years was due to demand exceeding supply. While buyers lined up, supply chain issues, including shortages of vehicle semiconductors and other parts, prevented timely sales of new cars. Ironically, this background led to record-high earnings for automakers, as marketing costs such as incentives were minimal.

As vehicle production and supply have returned to normal, this trend has changed. Prices have risen, and interest burdens have increased. Although there are some differences among manufacturers, consumers have hesitated to open their wallets, leading to increased inventory and rising incentives. Incentives paid by U.S. manufacturers to dealers averaged $2,365 last month, marking the highest level in the past year.

The average new car transaction price index in the United States compiled by market research firm Cox Automotive. It has steadily declined since turning downward in October last year. The drop compared to the beginning of the year is the largest in the past 10 years.

Price competition in electric vehicles (EVs), triggered mainly by Tesla and Chinese companies, is also expected to be a key factor affecting the performance of major automakers. Unlike other automakers, Tesla frequently adjusts its prices up or down. With EV demand slowing and new model update cycles, prices have been cut by tens or hundreds of thousands of won. Some models use cheaper Chinese-made batteries, lowering prices by tens of millions of won despite having the same exterior. BYD, considered a leading EV manufacturer alongside Tesla, has also reduced prices.

Most global automakers have yet to turn a profit on EVs. This is because they are still in the early stages of development and the production costs of parts such as batteries are high. With EV sales slowing and price-cutting competition emerging, corporate earnings are inevitably negatively impacted.

UAW members are holding pickets outside an assembly plant in Michigan, USA.

Additionally, factors such as strikes, exchange rates, and raw material cost fluctuations are worth watching. In the U.S., a prolonged tug-of-war over wage increases between the United Auto Workers (UAW) and local companies is showing signs of continuation. Job insecurity has intensified amid the electrification transition, and political involvement has increased ahead of elections. Automakers with historical ties to the U.S., such as General Motors (GM), Ford, and Stellantis, are expected to be directly affected, and if wages rise, other workplaces not affiliated with the union may also feel the impact.

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