Heavy Competition

Kia Corp. officials introduce the EV9 at the 2023 New York Auto Show at the Jacob Javits Convention Center in New York on April 5 (local time).
Kia Corp. officials introduce the EV9 at the 2023 New York Auto Show at the Jacob Javits Convention Center in New York on April 5 (local time).

Tesla’s aggressive price cuts are making Hyundai Motor Group grapple more in increasing its sales in the U.S. electric car market. The company is faced with the prospect of losing U.S. Inflation Reduction Act (IRA) subsidies while its competitors seem to be gaining momentum.

On April 9, Tesla cut its prices for the third time this year, according to industry sources. On July 7, the company lowered the U.S. retail prices of the Model S and Model X by US$5,000 (6.5 million won) each. Thus, the Model S is now priced at US$84,990, down from US$89,990 in the U.S. market. The price of the Model X was adjusted from US$99,990 to US$94,990.

Like Tesla’s previous price cuts, this price came without a notice. In addition to the higher-priced Model S and Model X, the Model 3 and Model Y have also been reduced by US$1,000 and US$2,000, respectively. Tesla’s cheapest Model 3 (Performance) was sold for US$62,990 earlier this year, but a series of price cuts brought the price down to US$52,990. That’s a US$10,000 reduction in just the last three months.

Tesla’s strategy of accelerating price cuts is paying off in the market. Tesla delivered 42,875 vehicles to customers in the first quarter, its highest quarterly volume ever. Compared to the first quarter of last year (310,480 units), this is a 36 percent increase.

Hyundai Motor Group has more to worry about by comparison. In addition to the IRA, which provides tax benefits only for North American-made EVs, competitors have cut prices. While the Korean carmaker has been setting new sales records in North America lately, it does not feel good. So far this year, Hyundai Motor Group’s sales in the United States have increased every month. After surpassing the 100,000-unit mark in January with 107,889 units, the company sold 146,698 units last month. This is the largest first quarter sales volume ever.

On the other hand, sales of Hyundai Motor Group’s pure electric vehicles, which the Korean automotive group is focusing on, have been sluggish. From 4,387 units in January, the number of its pure-electric vehicles sold increased only slightly to 5,225 units last month. The proportion of electric vehicles in its total sales has declined from 4 percent (January) to 4.1 percent (February) and 3.5 percent (March). The Hyundai IONIQ 5 was so popular that the model sold 22,982 units in the U.S. market last year, but only 2,114 units were sold in March, down 22 percent year on year.

Hyundai Motor Group is also racking its brains in order to respond to this situation. First, it plans to push back its U.S. electric vehicle production schedule from the first half of 2025 to the second half of 2024. Hyundai Motor Group is building Metaplant America, a 300,000-unit-per-year electric vehicle factory in Georgia of the United States. It will produce electric vehicles for three brands -- Hyundai, Kia, and Genesis.

“I think the right answer to the IRA is to do our best through commercial leasing and our factories under construction,” Hyundai Motor President Jang Jae-hoon told reporters at the recent Seoul Mobility Show. “We have to look at not only prices but also financing programs, so we are thinking about them from an overall competitiveness-based perspective.” Electric cars for leases and rentals are eligible for US$7500 subsidies regardless of where they are built.

However, only 5 percent of the leased vehicles sold in the United States are eco-friendly cars. That’s why the market continues to predict that Hyundai Motor Group will put out a price response card. “Hyundai will consider using various measures such as expanding dealer incentives in order not to relinquish its leadership in the U.S. EV market,” said Kim Pil-soo, a professor of future automotive at Daelim University.

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