[News Terms] Will Price Reduction Be a Catalyst to Overcome the 'Chasm'?

'Chasm' refers to the slump period experienced by new products or services that have garnered high expectations. It denotes a temporary phase of stagnant or declining demand during the transitional period when advanced technology products move from the early market to the mainstream market.

If this phase (slump period) is prolonged, the product is likely to be pushed out of the market. Many products fail to cross the chasm and become obsolete, but once this phase is overcome, consumption increases significantly due to the widespread adoption of the technology. Originally, 'chasm' was a geological term meaning a large gap between strata, indicating disconnection. However, it became widely used economically after Jeffrey A. Moore, a consultant from Silicon Valley, mentioned it in his 1991 book, 'Crossing the Chasm.'

Electric vehicles charging.
Photo by Yonhap News

Recently, as global demand for electric vehicles has frozen solid, the 'chasm' debate is in full swing, and the battle among automakers to overcome the chasm is intensifying. While some companies are reducing production of their main electric vehicle models, others are increasing investments, taking advantage of the slowed growth.

On the 19th (local time), American automaker Ford decided to drastically reduce production of the electric version of its popular model, the F-150 pickup truck, the 'F-150 Lightning.' As a result, about 1,400 employees at the Dearborn plant in Michigan, where this vehicle is produced, will leave the factory. Hertz, the world's largest rental car company, which has aggressively expanded its electric vehicle share over the past few years, announced on the 11th that it would dispose of about one-third of its electric vehicles, approximately 20,000 units.

On the 30th of last month, Japan's Nihon Keizai Shimbun reported that Toyota and Nissan chose to double the electric vehicle sales incentives paid to dealers in the United States to overcome the slowdown in electric vehicle sales.

Hyundai Motor Company, Ulsan EV Dedicated Factory Rendering.
Photo by Yonhap News

Chinese electric vehicle manufacturer BYD cut prices of electric vehicles such as the Atto 3 by 15% in Germany, and Tesla also lowered prices of models sold in China, Germany, and other European countries by 2.8% to 9%, initiating a chicken game. Regarding this, the British daily Financial Times (FT) quoted Carlos Tavares, CEO of Stellantis, on the 19th, saying, "The high price is a disadvantage causing slow growth in global electric vehicle demand," but also warned, "Continuing price cuts without considering actual costs is a 'race to the bottom' and will ultimately end in a 'bloodbath,'" highlighting the risks of price-cutting competition.

On the other hand, there are claims that price reductions will act as a catalyst to overcome the chasm. Lee Dong-heon, former head of regional analysis at Hyundai Motor Group's Global Management Research Institute, analyzed in the 'China Automotive Market Trends and Outlook Report' that "price cuts transform the electric vehicle game rule of innovation into an 'affordable price,' stimulating the public's electric vehicle purchases that prioritize economic feasibility."

Amid this atmosphere, Japanese automaker Honda is investing 10 trillion won to build an electric vehicle factory, and Toyota is expanding its local battery plants. The industry views this as an attempt to strengthen the electric vehicle sector, which lags behind American, Chinese, and Korean automakers, taking advantage of this opportunity.

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