EV dreams could be dashed as cars and electricity more expensive

An electric vehicle is being charged at an electric vehicle charging station at Yongsan Station in Seoul on June 29. [NEWS1]

Electric vehicle charging rates, and the prices of the cars themselves, are rising, tapping the brakes on the Yoon Suk-yeol administration's plan for eco-friendly vehicles.

Discounts from Kepco for EV charging, in effect since 2017, ended last month. The utility also increased the price of electricity by 5 won ($0.0039) per kilowatt-hour this month.

This means the price of electricity for EVs will cost 318.1 won per kilowatt-hour this month from 292.9 won last month, up 8.6 percent.

Charging a Hyundai Motor Ioniq 5 EV cost 22,670 won last month. This month, it is 24,620 won.

The prices of EVs are also continuing to rise. This is due to the increase in raw material prices due to a shortage of semiconductors and higher logistics and labor costs. Batteries account for more than a third of the production cost of EVs, and the prices of minerals such as lithium, nickel and cobalt used in batteries have almost doubled since the Covid-19 pandemic.

Tesla raised the prices of its Model X SUV and long range version of Model Y by $2,000 to $6,000 per unit last month. This is the third price increase this year. GM raised the price of its Hummer electric pickup truck by $6,250.

Higher prices may be a drag on Yoon's plan to increase the use of EVs. During his presidential election campaign, he promised to ban new registration of internal combustion engine care by 2035 and freeze EV charging rates at 300 won per kWh for the next five years.

The presidential transition committee raised the government's green car purchase target as part of the "Great Mobility Transformation." The special discount on charging rates ended this month, and as electricity prices rose sharply, incentives to purchase EVs virtually disappeared.

In the market, reactions to the higher prices are divided.

"The reason for choosing an EV despite the high cost of the car and lack of domestic charging infrastructure was because of the low maintenance costs," said one EV owner. "If electricity costs and charging rates continue to rise, I am concerned about whether I should continue to drive an EV."

In the EV community, there is a sense that Yoon broke his promise to freeze the charging rate for five years, while some people are surprised to learn that EVs offer no advantage when oil prices rise.

Some competitiveness may remain for EVs.

"Oil prices have risen significantly internationally, and electricity prices in Korea relatively cheap, so even if vehicle prices and charging rates rise together, sales volume will not be affected significantly," said Kim Pil-soo, professor of future automobiles at Daelim University.

"The industry is adjusting production to meet the government's EV subsidy budget, so there is basically a shortage of supply," continued Kim. "As consumer demand for EVs is still high, an increase in purchase and maintenance costs will not be enough to hinder the expansion of EVs."

BY KO SUK-HYUN [lim.jeongwon@joongang.co.kr]