The automotive industry is facing increasing pressure to raise prices due to soaring raw material costs, including batteries and semiconductors, compounded by high exchange rates. As signs of significant price adjustments emerge for the second half of the year, concerns are growing over a potential decline in demand with the expiration of individual consumption tax cuts at the end of the year.
◆ Global Car Prices Rise Amid Raw Material Costs
According to industry sources on May 18, the prices of key components for electric vehicles, such as lithium, aluminum, copper, and semiconductors, have surged, prompting price increases across the global automotive sector. BYD raised the prices of optional advanced driver-assistance systems (ADAS) for several models, including the Dynasty, Ocean, and Formula Leopard, by over 2,000 yuan last month. Xiaomi also increased the prices of all models in its new SU7 series by 4,000 yuan. Companies like Weilai and Xiaopeng plan to raise prices for major models in the second quarter.
The rise in battery raw material prices is particularly steep. Batteries account for 30% to 50% of the production cost of electric vehicles. According to market research firm Fastmarkets, the price of lithium, a key material for lithium iron phosphate (LFP) batteries used in budget electric vehicles, has risen to $25.15 per kilogram as of May 13, a 212% increase compared to the average of $8.10 in June of last year. The price of nickel, a core raw material for nickel-cobalt-manganese (NCM) batteries, has also increased by 28.4%, reaching $19,016.50 per ton, up from $14,879 at the end of last year.
Additionally, prices for high-performance DDR and storage memory semiconductors used in cars have risen by 70% to 100% compared to the end of last year. An industry insider noted, "As semiconductor companies like Samsung Electronics and SK Hynix focus on producing chips for big tech AI servers, the supply of vehicle memory, which has lower margins and stricter certification requirements, is becoming increasingly unstable. Demand for semiconductors is rising due to developments in software-defined vehicles and autonomous driving, but supply shortages are causing prices to skyrocket."
◆ Price Increases Expected in the Korean Market Starting in June
In South Korea, the trend of price increases is becoming evident. Tesla recently raised prices for some Model Y variants by 4 million to 5 million won, following increases in the U.S. The price of the Model Y Long Range AWD rose from 59.99 million won to 63.99 million won, an increase of 4 million won, while the Model 3 Performance and Model Y Long Body each saw a 5 million won increase.
BMW Korea plans to raise prices for some models starting in June, with increases expected to be around 1%. Models likely to be affected include the 5 Series, X6, and electric models such as the i4 and i5. A BMW Korea representative stated, "As the high exchange rate becomes entrenched, our ability to absorb exchange rate burdens is diminishing. We will finalize specific models, timing, and extent of the increases based on domestic conditions."
If the individual consumption tax cuts expire on December 31, consumer prices are expected to rise further. With car price increases coupled with higher tax burdens, demand is likely to weaken. An industry representative commented, "While we will increase our own promotions, such as interest-free financing and option discounts, the rapid rise in vehicle manufacturing costs limits our ability to offer significant discounts."
* This article has been translated by AI.
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