What Happens After the Electric Vehicle Chasm?…Hyundai Motor Group's Key to Global No.1 is 'Europe'

[Hyundai Motor Company, Over the Mobility] (5)
The Growing Importance of the European Market Alongside the US and India
Europe: A Market Expected to End the "Electric Vehicle Chasm" Early
Tougher European Emission Regulations This Year... EV Sales Expansion Anticipated
Seizing Market Share While Chinese Electric Vehicles Stall

Editor's Note[Hyundai Motor Company, Over the Mobility] is content that summarizes the innovation secrets that enabled Hyundai Motor Group to rise to the global third place. Historically, countries leading the automotive industry have dominated the global economic hegemony. The automotive industry, the flower of manufacturing, exerts comprehensive influence in terms of technological development, exports, and employment. While Hyundai Motor Company was once a fast follower, it has now emerged as a first mover leading the industry. We deliver the past, present, and future addresses of Hyundai Motor Company as experienced in global reporting sites. The series will be published as a book after 40 installments.

"Recently, the atmosphere in the European market hasn't been good. The mood among local dealers is quite depressed. Even though Europe is an advanced region, there are disparities in charging infrastructure development from country to country. Moreover, Chinese electric vehicle manufacturers are aggressively advancing."

This is a remark from a Hyundai Motor Company official who toured the European market at the end of 2024. Last year, Hyundai Motor Company and Kia's market share in Europe remained at 8.2%, staying in the 8% range for two consecutive years. In terms of sales volume, since surpassing 1 million units for the first time in 2018, they have exceeded 1 million units annually for four consecutive years until last year. However, growth has slowed when looking at sales growth rates. Hit directly by the electric vehicle chasm (temporary demand slowdown), sales even declined by -3.8% last year. This is a markedly different atmosphere compared to the U.S. and India, which set annual records during the same period.

For Hyundai Motor Group, the U.S. and India are key target markets aggressively expanding market share through active investment. In other words, these are markets that must succeed. On the other hand, Europe and Korea have become markets where they must maintain the market share they have built up. If it is difficult to aggressively increase sales volume, at least the market share should not decline. The European car market is the third largest in the world after China and the U.S. It is also expected to be the market where the chasm will end the fastest among major markets excluding China. The author believes that the key to Hyundai Motor Group becoming number one globally ultimately lies in the European market. Along with the upward trends in the U.S. and India, meaningful expansion in the European market can support aiming for the number one spot in overall global sales performance.

Decline in European Market Share: The Reasons

Hyundai Motor Company has started to adjust the production pace at its European production base, the Czech plant, from this year. The 2025 production target for the Czech plant was lowered by about 10% compared to the previous year's production volume to 295,000 units. The hourly production rate was also reduced from 66 units to about 60 units. This is due to the expected overall market downturn as electric vehicle demand decreases in Europe. Additionally, the European subsidiary's management was recently replaced to revitalize the atmosphere. Last year, Hyundai Motor Company appointed a new CEO for its European subsidiary for the first time in 15 years, and Kia also replaced its COO and vice president in charge of product and marketing.

As the electric vehicle chasm prolongs, overall industrial demand in the European market is also decreasing. In 2024, sales of commercial vehicles in the European Union (EU), European Free Trade Association (EFTA), and the United Kingdom combined reached 12,963,614 units, a mere 0.9% increase from the previous year. Among these, sales of gasoline (-6.8%), diesel (-11.8%), pure electric vehicles (BEV, -1.3%), and plug-in hybrids (PHEV, -3.9%) all declined. Only hybrid (HEV) vehicles showed a significant increase of 19.6%.

From a popular perspective, Europe, as an advanced market, is thought to have well-established charging infrastructure and strict environmental regulations, leading to a rapid transition to electric vehicles. However, the reality is different. Visiting Europe reveals that the electric vehicle charging infrastructure is much poorer than in Korea. Moreover, there are large disparities in infrastructure development between countries, and each country has different interests.

In March 2023, I toured the city of Hamburg, Germany, to observe the usage and installation status of electric vehicle chargers. Large charging stations near the city center were hard to find, and chargers installed in underground parking lots of large buildings were inaccessible to the general public. Although ground-level charging stations were visible throughout the city, it was difficult to find vehicles charging even during weekday daytime hours. A Volkswagen official at the German headquarters said, "Most electric vehicle owners install their own chargers at home and use them. They charge at designated locations and travel fixed distances (commuting), so they rarely use public chargers."

Electric vehicle chargers installed in the underground parking lot of a large building in Hamburg, Germany. Despite it being a weekday daytime, the electric vehicle parking spaces are completely empty. Photo by Woo Su-yeon

Electric vehicle chargers installed in an above-ground parking lot in downtown Hamburg, Germany. Despite being weekday daytime, the electric vehicle parking spaces are completely empty. Photo by Woo Su-yeon

Looking at the global car-to-charger ratio (number of electric vehicles per charger) also confirms the poor infrastructure status in Europe. According to data from the International Energy Agency (IEA), as of 2023, the global average number of electric passenger cars per public charger is 11. The U.S. has 26, the European Union 14, and China 8. Among 33 countries, South Korea has the lowest ratio, with about 3 electric vehicles sharing one charger.

In particular, Europe shows significant disparities between countries. Norway, the world leader in electric vehicle adoption, has a car-to-charger ratio of 34. The UK has 31, and Germany 25. In contrast, France has 14, Italy 11, and the Netherlands about 5. Due to the large disparities in charger installation and electric vehicle adoption among countries, automakers find it difficult to implement a uniform electric vehicle transition strategy for the European market. This means a segmented market-specific strategy is necessary.

"Tariff Lock" in Europe: "Stop the Chinese Electric Vehicle Offensive"

European countries' attitudes toward the Chinese electric vehicle invasion vary widely. Even on punitive tariff measures against Chinese electric vehicles, countries like Germany, France, and Italy have differing positions. The European Union (EU) believes that the Chinese government has broken global electric vehicle market rules by excessively subsidizing its domestic electric vehicle manufacturers. They argue that the Chinese government's support policies, including R&D funding, low-interest loans, electricity tax reductions, and raw material price discounts, excessively distort fair trade order.

German companies such as Volkswagen and Mercedes-Benz have over 30% of their global sales in China. Germany cannot oppose imposing tariffs on Chinese electric vehicles because if Europe imposes tariffs, the Chinese government is likely to retaliate with counter-tariffs. Automakers selling finished consumer goods must also consider Chinese public sentiment. This is why Germany cannot easily support tariffs on Chinese electric vehicles.

On the other hand, countries like Italy and France, where the Chinese sales share is not high, support the tariffs. These countries, home to mass-market brands like Renault and Stellantis, emphasize that they cannot allow Chinese electric vehicles to take over their domestic market share. After numerous discussions and votes, the EU began imposing additional tariffs of up to 35.3% on top of the existing 10% tariff on Chinese electric vehicles starting October 2024. The tariffs apply not only to Chinese local manufacturers such as BYD, Geely, and SAIC but also to American and German companies like Tesla and BMW that produce electric vehicles in China and import them to Europe.

In the short term, Europe's imposition of tariffs on Chinese electric vehicles could benefit Hyundai Motor Company and Kia. However, conversely, it also means that the penetration rate of Chinese electric vehicles in Europe has become so high that it is difficult to withstand without trade barriers. According to market research firm Dataforce, the market share of Chinese electric vehicles in the European electric vehicle market rose to 11.1% by June 2024. This was influenced by companies rapidly increasing sales in anticipation of initial tariff measures starting in July. After tariffs were imposed in November, the share dropped to 7.4% but maintained 8.2% by the end of the year (December). This measure was taken out of concern that without trade barriers, by 2025, one in four new electric vehicles sold in Europe would be Chinese-made. It is Europe's declaration of war to eliminate the price competitiveness, the greatest strength of Chinese electric vehicles, by raising tariffs.

Hyundai Motor Company and Kia must seize the opportunity created by China's hesitation due to tariffs and quickly establish a foothold in the European eco-friendly vehicle market. Especially in the small car (A and B segment) market preferred by Europeans, success depends on who introduces a competitive electric vehicle first. Hyundai Motor Company began selling the small electric vehicle Casper (local name: Instar) from the end of 2024. The starting price of the Casper electric vehicle in Germany is about 23,900 euros (36 million KRW). This is competitively priced compared to similar class vehicles such as the Citro?n e-C3 (23,300 euros), SAIC's MG4 (28,990 euros), and Volkswagen ID.3 (29,760 euros). Kia is targeting the European affordable electric vehicle market with the small electric sports utility vehicle (SUV) EV3. Hyundai Motor Group's strategy is to withstand the electric vehicle chasm by adding hybrid lineups to most of its main models.

Strengthened Carbon Emission Regulations... Hyundai Motor Company's Complex Calculations

This year, Europe's carbon emission regulations will be further tightened. The European Union has set the average carbon emission regulation target for new vehicles by automakers in 2025 to 93.6g per kilometer, about 18% stricter than the 115.1g target set for 2021?2024. Although the pace has slowed compared to the initial target, the trend of continuously reducing carbon emissions remains. The emission regulation targets vary by manufacturer depending on the average weight of sold vehicles and the number of electric vehicles sold.

Automakers have no choice but to increase electric vehicle sales to avoid fines due to stricter regulations. This is why a significant growth in the European electric vehicle market is expected in 2025. Hyundai Motor Group estimates that the total BEV market in Europe will increase by 24% to 2.56 million units this year. This is a significant increase compared to the previous year when electric vehicle sales shrank by 1.4%. Such market forecasts could be an opportunity for Hyundai Motor Group, which has established affordable electric vehicles and a full HEV lineup.

Another opportunity lies in carbon emission credits. Automakers can use various methods to meet regulations and avoid fines. These include increasing the sales ratio of BEVs, PHEVs, and HEVs and developing mild HEVs that improve internal combustion engine efficiency. Among these, the fastest way is buying and selling carbon emission credits between brands. Electric vehicle companies like Tesla earned carbon credit sales accounting for 3% of total revenue during the first to third quarters of 2024. Especially in Europe, the 'pooling' system, where multiple automakers combine their CO2 emissions to achieve joint targets, is spreading. Automakers with low electric vehicle sales ratios can use the pooling system to lower their average carbon emissions and reduce fine burdens.

According to the European environmental NGO Transport & Environment (T&E), comparing the gap between the 2025 carbon emission targets and actual 2023 emissions for 10 automakers operating in Europe, Kia ranked second and Hyundai Motor Company fourth, placing them in the upper ranks. Volvo Car Group had already achieved the 2025 target in 2023, and Kia showed a gap of less than 5g per kilometer compared to the 2025 target, indicating smooth progress toward the goal. If Hyundai Motor Company and Kia increase sales of affordable electric vehicles and expand market share centered on HEV lineups in Europe, more automakers will likely want to pool with Hyundai Motor Group after 2025. In the long term, this also suggests the possibility of a new business model selling carbon emission credits.

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