[NEWS IN FOCUS] EVs show sluggish sales with shrinking tax credits

Industry

Published: 30 Aug. 2023, 15:40 Updated: 30 Aug. 2023, 18:31

[NEWS IN FOCUS] EVs show sluggish sales with shrinking tax credits

EVs are being charged at a charging station in central Seoul on July 20. [NEWS1]

Electrifying Korean roads may become more difficult, with the growth of EV sales slowing down due to dwindling tax credits and a lack of charging infrastructure.

Hybrids, which charge themselves while driving, are filling up the lanes instead, with car brands offering unprecedented discounts to prevent their unsold EVs from stacking up at some dealerships.

EV sales during the January-to-July period rose 10 percent on year, the lowest growth rate since 2021 compared to the 88.7 percent growth during the same period in 2021, and 78.2 percent in 2022.

A total of 14,614 EVs were sold in Korea in July, down 6.4 percent on year and down 13.7 percent on month, according to data from the Korea Automobile & Mobility Association.

The situation is more pronounced in foreign countries that have a booming EV market.

Some 557,330 EVs were sold in the United States in the first half, according to market tracker Motor Intelligence. That is up by 50 percent on year, but the growth rate fell far short of 71 percent last year from the previous year.

EV sales in China rose by 32 percent in the first half compared to the same period last year, with the on-year growth rate only a third of the previous year, where the rate stood at 109 percent.

EVs are being charged at a charging station in downtown Seoul on Aug. 16. [YONHAP]

Higher prices, lower tax credits

Hefty price tags despite shrinking tax credits from the government led to the slowdown.

This year’s maximum tax credit for EV buyers in Korea stands at 6.8 million won ($5,100), down by 200,000 won, for cars that cost no more than 57 million won. Additional credits by local governments are also reduced.

A Seoul resident, for instance, could purchase a Hyundai Motor long-range Ioniq 5 at around 39.8 million won in 2021, applying some 10 million won of subsidies from its sticker price of 49.8 million won.

That same car now sells at 54.1 million won, and with all possible incentives, at 45.5 million won.

Domestic sales of Ioniq 5s plunged by 40.4 percent on year in 2023 through July. EV6 sales were cut by 19 percent.

“Price cut strategies by key players like Tesla and BYD are shaking up the whole EV growth roadmap,” Han Byung-hwa, a researcher at Eugene Investment & Securities, said. “The EV industry has passed the early stage now, and is entering a stage where customers are becoming sensitive to prices.”

Not enough chargers

Electricity prices are on the constant rise, once considered one of the biggest advantages of buying EVs over gasoline or diesel-powered vehicles.

The average price of electricity at public EV charging stations is billed at 324.4 won per kilowatt hour in August, up almost 80 percent compared to three years ago.

The lack of charging infrastructure also needs tackling.

There are around 240,000 EV chargers across the country as of the end of May, according to the Environment Ministry, just half of the total EVs on Korean roads. Of them, fast chargers only account for 10 percent, or 25,000 units.

That means Korea has 50.1 chargers per 100 EVs, one-sixth of Britain which has 318.5 chargers per 100 EVs, according to data from the Korea Automotive Technology Institute.

Germany has 230.4 chargers per 100 EVs, while the U.S. has 185.3 and Japan 153.1 per 100 EVs.

“It appears that all who are highly interested in EVs and who can afford them have already bought EVs,” Lee Ho-geun, an automotive engineering professor at Daeduk University, said. “Now the market has shifted to general consumers, and in order to increase the demand, the [financial] burden should be reduced.”

Discount battle

Automakers are scrambling to slash the prices of their EVs, with Tesla carrying out the biggest cut.

Tesla in July released the latest rear-wheel drive Model Y, the first Shanghai-made Tesla car for Korea, at 56.99 million, around 20 million won cheaper than the previous model. It qualifies for the full subsidy from the Korean government, which means it can be purchased in the 40 million won range.

Other imported brands like Mercedes-Benz and BMW are also offering up to 20 percent discounts on their EVs.

Mercedes is offering up to 17 percent off its EQS sedan at 158 million won, according to car information provider Getcha. BMW is offering its iX3 SUV at 70.3 million won, down 15 percent from the sticker price.

Audi is offering a maximum 20.5 percent discount for its e-tron SUV.

Kia is slated to release an electric Ray next month, equipped with cheaper LFP batteries, at the price of 20 million won.

KG Mobility’s Torres EVX will also come with BYD’s LFP batteries next month. Buyers will be able to purchase the SUV at 30 million won including the government subsidies.

Hybrids are performing well, with the market now growing to half of the combustion engine vehicle market.

A total of 176,699 hybrids were sold in Korea in the first half, up 36.4 percent on year. The size of Korea’s hybrid market is estimated to be 6.12 trillion won in the first half, over 40 percent of the international combustion engine vehicle market.

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