Tesla's king-of-the-road status under threat globally

Industry

Published: 26 Jul. 2022, 18:11 Updated: 26 Jul. 2022, 18:49

Tesla's king-of-the-road status under threat globally

Tesla Model 3 vehicles are being made at its Shanghai plant. [REUTERS/YONHAP]

For more than a decade, Tesla has reigned supreme in electric vehicle (EV) land. That is changing fast as it loses its No. 1 spot.

It is being challenged on affordability — as it is constantly raising its prices — and on features.

Tesla sold 575,000 EVs in the global markets in the first half, losing its crown to Shenzhen's BYD in terms of the number of units sold. BYD sold 647,000 all-electric vehicles and plug-in hybrid vehicles in the first half, up 323 percent on year, according to data from SNE Research.

During the same period, the combined sales of Hyundai Motor and Kia jumped 75 percent on year to 248,000. It ranked fifth place, beating Mercedes-Benz and BMW. Tesla's share in the Korean EV market dropped from 85 percent to 52 percent this year.

Price competitiveness

The Austin, Texas-based company is testing its customers as it makes its vehicles more expensive.

Tesla recently raised the price of its Model 3 Long Range model by 1.2 million won ($917) to 84.69 million won in Korea. It was the sixth price increase in the domestic market this year alone, and Tesla blamed the surging cost of raw materials.

Compared to last year, the price of the same model has increased by 41 percent.

Model 3 is the cheapest model from Tesla, and also the only model that is eligible to receive the subsidy from the Korean government. The recent price increases have made the model very close to the maximum to qualify for the subsidy, which is 85 million won.

The Model Y Long Range price has gone up 1.8 million won, or 38 percent, and the Model Y Performance price also soared by 2.8 million won, or 31 percent.

But the biggest criticism is that Tesla has upped the prices without upgrading any features of the vehicles. Usually, carmakers raise prices only after improving the features or coming up with new designs, even if the update is small and the price hike is actually due to other factors. These updated vehicles are introduced as "facelifts," with the automaker using the changes to justify the new price.

Rivals are scrambling to release new models with improved features and reasonable prices.

Hyundai Motor recently introduced Ioniq 6, the second car from the all-electric Ioniq brand. The price has not been confirmed, but the company said it will start at some 55 million won, which is about half of the price of Model Y from Tesla. Compared to Model 3 Long Range, it will be around 35 percent cheaper.

With the price tag, it will also be eligible for 100 percent of the government subsidy.

"I debated between buying an Ioniq or Tesla Model 3 and decided to go with the Ioniq 6," said Lee Chae-young, a 31-year-old office worker in Yeoksam-dong, southern Seoul.

The decision come after more than a year of consideration, Lee said. She gave up the Tesla Model 3 option after realizing the "surprisingly expensive price."

"My friend who bought the Tesla model like two years ago bragged that he only paid about 40 million won for it after the government subsidy," Lee said. "But when I inquired about it recently, I was told that I have to pay over 65 million won."

"The Ioniq 6 will be a lot cheaper than that, and I can also get the full government subsidy," Lee added. "The delivery time will be shorter as well."

Hyundai Motor's Ioniq 6 [HYUNDAI MOTOR]

Hyundai Motor also improved the range, which was known as one of its biggest downsides compared to Tesla cars.

An Ioniq 6 can travel 524 kilometers (326 miles) on a full charge, according to the Environment Ministry. That's longer than Model Y's 511 kilometers and in line with Model 3 Long Range's 528 kilometers.

The Ioniq 6 will start going on sale in some parts of Europe at the end of this year, and in the first half of next year in North America.

Mercedes-Benz's EV sales rose four-fold on year in the Korean market in the first half, driven by the newly released EQA SUV and the EQS. It had a 10.7 percent share in the market, compared to 2.9 percent last year, according to data by Korea Automobile Importers & Distributors Association and CarIsYou.

It ranked as the No. 2 imported brand in the Korean EV market, just after Tesla.

BMW's EV sales surged 16-fold, and it took 9.5 percent of the market.

"Tesla's dominance of EV market nears the end as many automakers have jumped to the EV race starting April and May in earnest," said Kim Pil-soo, an automotive engineering professor at Daelim University, who also serves as the chairperson of the Korea Electric Vehicle Association.

"Hyundai Motor and Kia have been releasing many new models, which offer more options for customers," Kim added. "But in case of Tesla, it has not been introducing new models for the past few years, and the only vehicle on the rollout list is the Cyber Truck, which is to be released next year."

Bank of America analyst John Murphy forecast that "Tesla's share in the EV market will fall to about 11 percent in 2025 from over 70 percent today" in his annual Car Wars report. Tesla has loyal fans, but it won't be able to keep up with the pace of new models coming from other brands, he added.

Mercedes-Benz's EQS [MERCEDES-BENZ KOREA]

Production capacity

Tesla still rules the industry in terms of production.

It produced 258,580 EVs in the second quarter alone. That's down by 15 percent on quarter due to the lockdown of its Shanghai plant amid the pandemic, but is more than the combined production of Hyundai and Kia.

During the same period, Hyundai Motor made 54,461 EVs, while Kia made 35,139 EVs.

Hyundai Motor said it aims to sell about 50,000 Ioniq 6s in the global markets next year. That's around double the number of Ioniq 5s and EV6s sold in the European market last year, but still far short of Tesla models. Tesla delivered 238,533 Model 3s and Ys in the second quarter alone.

Hyundai Motor and Kia currently have no EV-dedicated factory. They have been making EVs in their existing plants.

"What is really important now is that Hyundai should build more EV-dedicated factories," Professor Kim said.

Hyundai has announced that it will spend $5.3 billion to build its first full-fledged EV factory in Georgia. It will have the capacity to produce 300,000 EVs per year.

It recently also decided to build an EV factory in Korea, which will be the first in the country.

Both plants will likely start mass production in 2025.

BY SARAH CHEA [chea.sarah@joongang.co.kr]