The electric vehicle market is showing signs of emerging from a prolonged period of stagnation, known as the 'chasm,' but South Korean automakers are facing increasing challenges. In an effort to boost sales, they are focusing on expanding affordable model offerings, which has made it difficult to maintain profitability amid fierce competition from Chinese electric vehicles like Tesla and BYD.
According to industry reports, the decline in electric vehicle prices is becoming more pronounced in Europe, the largest electric vehicle market outside of China. The average price of battery electric vehicles (BEVs) fell to €42,700 last year, a decrease of €1,800 (about 4%) from the previous year. This marks the first price drop since 2020, with the B-segment (small cars) seeing a 13% decline.
The trend is similar in South Korea, where the average selling price of BEVs dropped from approximately 67.5 million won in 2023 to 55.9 million won in 2024, a decrease of about 17.2%. The share of electric vehicles priced between 30 million and 40 million won also surged from 12.5% to 32.8% during the same period, indicating a rapid expansion of competitively priced models.
Affordable models are driving the growth in electric vehicle sales. As of last month, Tesla's Model Y saw 73,125 new registrations this year, a staggering 97.4% increase compared to the same period last year. Among domestic electric vehicles, the Kia EV3 also performed well, selling 26,139 units, reflecting a 39.5% increase.
Despite the growth in sales, maintaining profitability remains a challenge. Initially, high-performance electric vehicles dominated the market, but now affordable models priced between 30 million and 40 million won are leading the way. Automakers are adopting strategies to lower entry prices to break through the prolonged chasm.
In the second quarter, Hyundai Motor Company reported record quarterly sales, yet its operating profit fell to 2.85 trillion won, a 20.8% decrease from the previous year. The operating profit margin also dropped by 1.7 percentage points to 5.8%. Kia experienced a similar trend, with a 12.6% increase in sales but a 4.9% decline in operating profit and a 1.4 percentage point decrease in operating profit margin.
The intensifying competition from Chinese electric vehicles adds further pressure on South Korean automakers. BYD is expanding its reach into the plug-in hybrid electric vehicle (PHEV) market, targeting the mid-range segment. Its recently unveiled mid-size SUV, the 'Sea Lion 6 DM-i,' has attracted attention with a low price of 37.5 million won (for the front-wheel drive version), while competing PHEVs in the domestic market are priced above 50 million won.
Meanwhile, Tesla is boosting its sales by offering models at similar price points to domestic electric vehicles, leveraging its brand strength. As the prices of its key models are comparable or slightly higher than domestic offerings, more consumers are choosing Tesla for its brand recognition and product appeal. With ample supply from its Shanghai factory, Tesla has maintained its position as the top-selling imported car brand in South Korea for eight consecutive months from February to September.
Ultimately, South Korean automakers find themselves in a 'sandwich' position, facing price competition from BYD in the mid-range market and brand competition from Tesla in the higher price segments. An industry insider noted, "The competitiveness of Chinese electric vehicles and Tesla's brand power are continuously narrowing the market share of domestic electric vehicles. It's challenging to raise prices, so companies must focus on cost reduction strategies."
* This article has been translated by AI.
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