"This Year Marks a Crossroads for Electric Vehicle Popularization... Price Competitiveness Becomes Crucial"

It is forecasted that this year will be a crucial gateway for the popularization of electric vehicle (EV) adoption. As price competition led by major leading companies continued from last year into this year, the key to the popularization process lies in whether EVs can be supplied to the market at prices comparable to existing internal combustion engine (ICE) entry-level models.

Yang Jin-soo, head of the Automotive Industry Research Office at Hyundai Motor Group's Economic and Industrial Research Center, said at a seminar hosted by the Korea Automobile Journalists Association on the 18th, "After Tesla drastically lowered EV prices in China and the United States early last year, the price reduction competition has continued," adding, "This price competition will serve as an opportunity to emphasize the importance of ‘affordable price ranges’ in the popularization process of BEVs."

Chinese BYD electric vehicles waiting to be loaded on a car carrier ship
[Photo by Yonhap News]

He diagnosed that EV adoption is past the introduction phase and is at the early stage of popularization. So far, the market has been created mainly by some early adopters who prefer innovative technologies under policy leadership. In January this year, Tesla lowered the prices of its main models, Model 3 and Model Y, by approximately 1.7?7.8% in China compared to a year ago, and by 17.0?33.3% in the United States. In response, local Chinese brands and American competitors also followed suit with price cuts.

Since it is still in the early adoption stage, EV prices tend to be higher than those of similar-class internal combustion engine vehicles. This is because development costs are substantial and economies of scale have not yet been realized. Nevertheless, some Chinese EV companies and existing automakers have begun to introduce low-priced entry-level models one by one. BYD, competing with Tesla for first place, launched the small sport utility vehicle (SUV) Seagull at 74,000 yuan (approximately 14 million KRW). Nearly 40,000 units were sold, ranking it fourth in China. In Europe, Renault Dacia released the small SUV Spring at 17,000 euros (approximately 25 million KRW), selling about 50,000 units.

Last year, EV sales, including plug-in hybrid electric vehicles (PHEVs), were estimated at about 13.21 million units, nearly a 32% increase from the previous year. This year, sales are expected to reach approximately 16.46 million units. The electrification penetration rate, which is the proportion of EVs in the total new car sales market, is expected to approach 20% this year. While China leads the PHEV market, the influence of the United States and Western Europe is expected to grow in the pure electric vehicle market.

Global Automobile Demand Status and Outlook [Source: Hyundai Motor Group]

Yang predicted that the global new car market will recover but at a somewhat slower pace compared to last year. Last year, global new car sales were estimated at about 82.8 million units, representing an increase of more than 9% compared to the previous year. However, this year, due to economic downturns, weakened consumer sentiment, and the exhaustion of pent-up demand, total sales are expected to increase by only about 1.6% to approximately 84.12 million units.

By major markets, the United States is expected to grow by 2.0%, Europe by 2.7%, and China by 0.7%, all showing slower growth than last year. In particular, South Korea is expected to see new car sales decline by about 2.2% to approximately 1.67 million units due to burdens from installment interest rates and delayed recovery in consumer sentiment. The domestic market contraction is expected to continue into the following year.

Hyundai Ioniq 5 exhibited at the LA Auto Show
[Photo by Yonhap News]

Profitability of major automakers is expected to decline. Porsche, which drives profitability within the Volkswagen Group, is likely to be affected by poor business performance in China, and General Motors is expected to face increased costs due to wage hikes and losses reflected in its autonomous driving business. Tesla’s operating profit margin is also declining due to price cuts on key products and investments in facilities and research and development. On the other hand, Toyota is expected to generate significant profits due to strong sales and favorable exchange rate effects. Accordingly, companies are expected to respond by reducing costs, adjusting the pace of EV production, and scaling back new car launches.

China, which rose to become the top automobile exporter last year, is expected to further expand its global influence by increasing overseas factories and strengthening strategic alliances with European and Japanese companies, Yang predicted. As connected car technology, which differentiates in-vehicle user experience, becomes increasingly important, the advancement of autonomous driving technology using artificial intelligence (AI) is also expected to steadily continue throughout this year.

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