A Tesla Model X crossover utility vehicle is seen in this file photo. (Yonhap)
SEOUL, April 18 (Korea Bizwire) — The electric vehicle (EV) market is about to experience fierce price competition as Tesla continues to slash prices worldwide and BYD and Volkswagen introduce entry-level compact EVs, according to a recent report from the Korea Automotive Technology Institute (KATECH).
The report, titled “The Beginning of the Era of Electric Vehicle Price Competition,” highlights that while securing new business models and product differentiation will also become significant, non-price competitiveness factors are expected to take a back seat.
The report indicates that both domestic and foreign consumers consider economic factors such as price and purchase subsidies crucial in their decision-making process when opting to buy an EV.
Although environmental friendliness was given more priority in the early stages of the EV market, consumers now prioritize price comparison with internal combustion vehicles.
In response, several automakers, including Tesla, Ford Motor, Lucid Motors, XPeng Motors, BYD, BMW, and Volkswagen have announced price cuts in the U.S. and China to increase their market share through price competitiveness.
The report also reveals that carmakers are launching new entry-level small EV models to cater to niche markets, especially in Europe. Demand for small EVs is expected to grow in the C-segment and below.
BYD’s Seagull, scheduled for release this year, will cost only US$10,000 (about 13 million won), while Volkswagen’s ID.2ALL, scheduled for release in 2025, and Renault’s 5 EV, scheduled for release next year, will cost around 25,000 euros (about 36 million won).
Tesla’s Model 2, touted as a “half-price Tesla,” aims to target a price of $25,000 (about 32.7 million won), although the release date is still undecided.
This photo taken on Sept. 15, 2022, shows Volkswagen’s all-electric ID.4 SUV unveiled at the Grand Walkerhill Seoul hotel in western Seoul. (Yonhap)
To secure price competitiveness for EVs, carmakers are planning various strategies, such as investing directly in the procurement of battery minerals, such as mines and mining companies or establishing joint ventures with battery companies to produce low-cost batteries.
The report warns that intensifying price competition is expected to reduce the per unit sales profit of automakers in the short term, indicating that the EV market may be reorganized around a small number of surviving companies.
In addition, business models to create high value-added services will continue to emerge, such as Tesla’s Full Self Driving (FSD) autonomous driving technology software and Kia’s vehicle feature subscription service through its Connect Store.
“Automakers will try to increase their market dominance through sophisticated product differentiation while focusing on various non-price competitive factors,” said Lim Hyun-jin, a senior researcher at KATECH.
“For this, software-related underlying technologies will be key.”
Kevin Lee (kevinlee@koreabizwire.com)
