Electric vehicles in recession, Alert indicator signaling the presence of a discounted competition. The global electric vehicle market is hemorrhaging due to continuous price reduction competition. The plan is to break through the slowing growth with price cuts, but there are concerns that indiscriminate discount competition could worsen the overall profitability of the market.
According to the industry on the 28th, China’s BYD recently cut the price of electric vehicles by up to 15% in China and Europe. The starting price of ATO 3, the flagship model, has been lowered to 40,000 euros (approximately 58 million won), 10 million won cheaper than before. Tesla also responded to BYD’s lead. Tesla lowered the prices of Model Y Long Range and Model Y Performance in Germany by 5,000 euros (about 7.3 million won). France, Denmark, the Netherlands, and Norway also lowered prices by up to 10.8%.
It’s not just these. Volkswagen has reduced the factory price of its electric vehicle ID series by up to 30% in Europe. General Motors, which was excluded from the U.S. IRA subsidy list, decided to sell its electric vehicles at a discount of $7,500, which corresponds to the subsidy amount.
Hyundai Motor Company and Kia Motors, which do not receive IRA benefits, are also jumping into the discount game. Hyundai Motor Company is offering a $7,500 cash bonus to individual consumers who purchase the 2024 Ioniq 5 and 6 and Kona Electric in the United States until this month. Kia will also provide cashback of $3,000 to $7,500 per model to individual consumers who purchase the
2023/2024 EV6 and Niro EV by the 4th of next month. If you purchase the 2023 model EV6 , you can get back $7,500, and for the 2024 model, you can get back $5,000.
The price cuts by automakers are partly intended to encourage purchases by offsetting reduced subsidies, but high prices, which are considered a major factor in the slowdown in demand for electric vehicles, are playing a bigger role than anything else. According to Edmunds, an automobile market research company, the average price of an electric vehicle is $60,544 (about 79.5 million won), which is $13,000 (about 17 million won) more expensive than an internal combustion engine vehicle.
There are many voices warning against excessive discount competition. This is due to concerns that an unreasonable ‘game of chicken’ could significantly reduce the overall profitability of the automobile industry. For automakers that do not have the capacity to cut prices, a deterioration in profitability is inevitable.
For example, Ford, the second-largest automobile company in the United States, recently decided to significantly reduce the production of electric pickup trucks. In response to Ford’s announcement, Stellantis CEO Carlos Tavares pointed out, “The price discount competition that is proceeding at a murderous pace while ignoring realistic cost levels will ultimately bring bloodshed to the electric vehicle industry.”
He then warned, “The profitability of a company that recklessly lowered the price of (electric vehicles) has been cut down mercilessly. The electric vehicle market is already a red ocean, and new entrants will face a very difficult future.” In fact, it can be interpreted as a comment aimed at Tesla.
On the other hand, there is a view that discount competition will accelerate the popularization of electric vehicles. Lee Dong-heon, former head of regional analysis at Hyundai Motor Group’s Global Management Research Institute, said in the ‘Chinese Automobile Market Trends and Forecasts’ report, “By changing the rule of the electric car game called ‘innovativeness’ by lowering the price to ‘affordable price’, the public who values economic efficiency will be able to drive electric vehicles. “It stimulates purchases,” he analyzed.