Korean orders accelerate for Tesla’s low-price Model Y

Industry

Published: 21 Jul. 2023, 18:41

Korean orders accelerate for Tesla’s low-price Model Y

Tesla cars are charged at a charging station in front of the Tesla China headquarters in Beijing, China [EPA/YONHAP]

Tesla’s unconventional low-price strategy seems working in Korea so far, with surging orders of the latest Shanghai-made Model Y.

Over 20,000 orders have been made for Model Y in only a week since its introduction in Korea, according to local reports, though Tesla Korea did not confirm the numbers.

The skyrocketing orders came as the rear-wheel drive Model Y, the first Shanghai-made Tesla car for Korea, was released for 56.99 million won ($44,440), which theoretically qualifies it for the full subsidy from the Korean government.

The price of the previously introduced Model Y was around 78 million won.

Tesla Korea marketed the price of the Model Y as being cut to a price at the back end of the 40-50 million-won range, applying all the subsidies from the central and local governments. Delivery is expected to start in the third quarter.

The Korean government has yet to announce whether the vehicle will qualify for the subsidy, which translates to 6.8 million won.

A screen capture of the Tesla Korea website that sells the Model Y at 56.99 million won. [SCREEN CAPTURE]

The price cut was possible as the car was made with cheaper lithium iron phosphate, or LFP, batteries made by CATL and manufactured in Tesla’s Shanghai plant.

It is the first China-made Tesla offering in Korea as the U.S. EV maker had only been selling vehicles with nickel, manganese and cobalt (NMC) batteries.

Under the Korean Environment Ministry, EVs that cost 57 million won or less are eligible for 100 percent of a subsidy from the central government. For EV models that fall between 57 million won and 85 million won, subsidies will be 50 percent while EVs that cost more than 85 million won will not be eligible for any subsidies.

Assuming that the Model Y can get the full subsidy from the central government, it can be purchased at around 48.4 million won in Seoul combining all additional subsidies from the Seoul Metropolitan Government. The price will even be reduced to 47 million won in Incheon.

That is just a 4 million won difference from Hyundai Motor’s Ioniq 5.

“Getting a Model Y at the late-40-million-won price tag is unbelievable,” read an online post who identified himself as an Ioniq 5 owner and recently made an order for the Model Y. “It uses Chinese batteries but the price competitiveness is too appealing.”

“The Model Y now costs a similar amount to the Hyundai Ioniq 5 and Kia EV6, and even around 20 million won cheaper than Genesis GV60, so who would choose those over the Model Y?”

Tesla Gigafactory in Shanghai [YONHAP]

However, experts say it is unlikely that the Model Y will receive the full subsidy.

“Nothing has been decided if the Model Y qualifies for the subsidy,” the Environment Ministry said in a statement.

But people should be aware that “Tesla is not assigned an eco-friendly car sales target,” and “Model Y has not been equipped with ‘innovative technology’ under current regulations.”

The Korean government offers subsidies on various aspects.

Ten automakers in Korea have been assigned eco-friendly car sales goals by the government. They are Hyundai Motor, Kia, KG Mobility, Renault, GM, Mercedes-Benz, BMW, Volkswagen, Toyota and Honda.

A qualifying innovative technology is the vehicle-to-load (V2L) function, which allows the car to provide electricity to other devices without additional equipment, with both interior and exterior outlets for convenience. Most Hyundai and Kia EVs have the function.

Model Y’s short mileage is also an obstacle.

With the cheaper LFP batteries, the newly launched Model Y can run 350 kilometers on a single charge, according to Environment Ministry, compared to 551 kilometers of the Model Y with NMC batteries.

The mileage decreases to 279 kilometers in low temperatures.

Meanwhile, Tesla CEO Elon Musk hinted at further price cuts adding that he thinks “it does make sense to sacrifice margins in favor of making more vehicles," in the unstable macroeconomic conditions, at a conference call on Wednesday.

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