Cheaper Cars but Less Subsidies
A bad feeling is growing among makers of electric vehicles that previously enjoyed rapid sales growth in the global automobile market. This is because their sales growth is staying on the skids year on year in major markets such as Korea, China, and the United States.
According to the Korea Automobile Manufacturers Association (KAMA), 91,825 electric vehicles (EVs) were sold in Korea from January to July of this year. This is an 11.2 percent increase compared to 82,587 units in the same period of 2022. However, compared to a 75.6 percent year-on-year increase in EV sales in the first half of 2022, the growth rate dropped to one sixth.
The downturn in EV sales was also evident in the month of July. In fact, a total of 12,848 EVs were sold in Korea last month. That represented a month-on-month drop of 13.7 percent and a year-on-year decrease of 12.8 percent.
The situation has forced many local governments to hold their remaining subsidies for EV purchases in Korea.
Even in major markets like the United States and China, EV sales growth is slowing down. In the first half of this year, U.S. EV sales totaled 557,330 units, up 50 percent from the same period last year according to market research firm Motor Intelligence. Despite the increase in sales, the growth rate was still well below 71 percent in the first half of 2022. China also saw a 32 percent year-on-year increase in EV sales in the first half of this year but the growth rate was one third of 109 percent in 2022.
Reasons for the slowdown in EV market growth vary by country, but a common factor is a cut in subsidies, analysts say. In fact, the United Kingdom and China have completely have stopped giving EV subsidies this year. Norway has drastically reduced incentives for EV purchases and is imposing a weight tax on EVs. EVs account for nearly 80 percent of new car registrations in the Northern European country. This year, the Korean government also scaled down its maximum EV subsidy from 7 million won to 6.8 million won.
Improving charging infrastructure is also a challenge. According to the Korean Ministry of Environment, Korea had 240,000 EV chargers as of the end of May. This was half of the number of EVs (465,000) at the time. In particular, there were 25,000 fast chargers, or 10 percent of the total.
The number of chargers per 100 EVs is 153.1 in Japan, 185.3 in the United States, and 230.4 in Germany, according to the Korea Automotive Technology Institute. In the United Kingdom, the number is 318.5, more than six times higher than in Korea.
As the popularity of EVs has waned, manufacturers are scrambling to cope with it, including lowering prices one after another. Tesla recently announced on Weibo, a Chinese social media site, that it will lower the price of its Model Y Long Range from 313,900 yuan to 299,900 yuan. This will be the second price cut for the model in the Chinese market this year. The global EV giant cut the prices of its flagship models including the Model 3 and the Model Y in January.
Volkswagen also lowered the prices of nine of its electric sport utility vehicles (SUVs) by up to 60,000 yuan (US$1,098) this month. China’s Lingpao marked down the price of an electric passenger car by 20,000 yuan from 200,000 yuan.
Kia Corp. will launch the EV5, an electric SUV for the Chinese market within this year. The Korean automaker will load the EV5 with Chinese lithium iron phosphate (LFP) batteries instead of Korean nickel-cobalt-manganese (NCM) batteries in an effort to boost the model’s price competitiveness. The EV5 will be charged with a 400 V system instead of an 800 V high-voltage one.