The growth of electric vehicles (EVs) changing the paradigm of the global automobile market has come to an abrupt halt. As a result, carmakers are showing mixed moves.
General Motors (GM), Ford and Volkswagen, as well as the world’s No. 1 EV maker Tesla, have postponed or canceled their investment plans in electric vehicles one after another. Hyundai Motor Group and BMW, on the other hand, are executing their investments as planned and focusing on their policy of receiving the right prices while predicting an increase in demand for EVs.
Tesla, a game-changer in the EV market, recently changed its stance. “A lot of people are living paycheck to paycheck, they’re in debt, they have credit card debt and they have to pay for mortgages,” CEO Elon Musk said during the company’s third-quarter earnings call on Oct. 18, emphasizing “We need to make EVs more affordable.”
In fact, Tesla has marked down the price of its most expensive model, the Model X, by more than 30 percent so far this year. “These price cuts are impacting Tesla’s profits,” Bloomberg reported, “Tesla’s auto sales grew 51 percent last year, but only 5 percent in the third quarter of this year. Meanwhile, the EV giant’s gross profit margins fell to 16.3 percent, the lowest in more than four years.”
Tesla is not alone in changing its EV sales and investment policies. A US$5 billion joint project between GM and Honda has also been canceled. The project aimed to develop an entry-level EV model with the goal of beating Tesla. GM has also delayed the start of an EV factory in Michigan of the United States by one year.
Ford said it will postpone US$12 billion of its already planned US$15 billion in EV-related investments. Volkswagen Group also scratched off a plan to build a US$2 billion new EV factory in the United States.
“No market participant doubts the mid- to long-term growth of the EV market, but it is entering a very difficult stage in the short term,” said Han Byung-hwa, a researcher at Eugene Investment & Securities.
Lee Hyun-soo, a researcher at Yuanta Securities, also diagnosed that EV market growth is slowing down and a price war is taking place.
Some EV makers are taking different paths. Hyundai Motor Group, which sold 50,000 EVs in the third quarter of this year, says it has no plan to change its EV strategy. Seo Kang-hyun, vice president of Hyundai’s planning and finance division, called a recent slowdown in demand “a temporary issue,” saying in an earnings call last month, “We are not thinking about conservatively slowing down EV production or development.” Hyundai Motor Group plans to sell 1.94 million EVs by 2026. The figure is more than five times the number of EVs it sold in 2022 (375,000 units).
BMW also remains optimistic. Even in the third quarter, when demand for EVs froze, sales of pure-electric models accounted for 15.1 percent of BMW’s sales, exceeding the 15 percent target. “BMW is not interested in an EV price war as orders surge,” Reuters reported. When asked if BMW would sell its EVs cheaply to boost demand for its EVs in China, BMW CEO Oliver Zipse said, “We are not interested in lowering prices to increase our market share.” He made it clear that the German automaker will maintain its policy not to cut the prices of its cars, saying, “A price cut is not our strategy.”