[NEWS IN FOCUS] Smaller is better, as Korean EV market shifts gears

Industry

Published: 04 Oct. 2023, 16:57

[NEWS IN FOCUS] Smaller is better, as Korean EV market shifts gears

Kia unveiled the EV5 for the first time at the Chengdu Motor Show held in Western China International Expo City on Aug. 25. [KIA]

The Korean EV market is transforming at rapid speed, with smaller and cheaper vehicles rolling off production lines en masse, while big and fancy cars stack up at some dealerships.

Global automakers are scrambling to release low-cost EVs with cheaper battery technologies prevalent in China, to win the price war amid lingering economic uncertainties.

Only 2,898 Kia EV9s were sold in the first three months since its introduction, falling considerably short of more than 10,000 preorders, according to data by market tracker CarIsYou. In August alone, only 551 EV9s were sold in Korea.

More than 5 meters (16.4 feet) long, the EV9 is the first three-row electric SUV introduced by a local brand.

A passerby looks at an EV9 displayed at the Kia EV Unplugged Ground exhibition center in Seongsu-dong, eastern Seoul. [NEWS1]

Meanwhile, Kia's Ray mini EV has been selling like hot cakes, with more than 6,000 preorders made as of the end of September, far surpassing its target of 4,000.

With a price set under 30 million won ($22,044), customers can purchase it in the lower 20 million won range applying the government subsidy. The Ray EV is also exempt from various tax policies including the special consumption and acquisition taxes.

The Ray mini EV is powered by a cheaper lithium iron phosphate (LFP) battery manufactured by the Ningde, China-based Contemporary Amperex Technology (CATL).

The conflicting market behavior hints at a change in consumer demand patterns, with consumers now preferring smaller EVs with lower price tags.

“The EV9 failed to secure a solid position in the market due to its expensive price. Meanwhile, demand is rising for low-cost EVs,” said Kim Pil-soo, an automotive engineering professor at Daelim University.

It is inevitable for Kia to reconsider its EV strategies for the global market as it prepares for the sale of EV9s in the U.S. market starting next month, with the sticker price set at $54,900.

Hyundai Motor is also slated to release the Ioniq 7, a large-size SUV, next year.

Kia's new mini Ray EV [KIA]

Increasing demand for Chinese companies' cheaper LFP batteries is encouraging the price war. LFP batteries are around 40 percent cheaper than nickel-cobalt-manganese (NCM) batteries, for which Korean makers hold a firmer standing.

Around 90 percent of the world's LFP batteries are made by Chinese companies, with CATL and BYD racing for the top two spots.

One out of four EVs were made with LFP batteries last year, according to data from the International Energy Agency. The market share of LFP batteries in the overall EV battery market, which stood at 6 percent in 2020, rose to 27 percent last year.

“Hyundai Motor is currently considering a plan to use LFP batteries for their Kona EVs,” said a source in the auto industry. “With the cheaper batteries, the price of a Kona EV will be lowered to 30 million won from the current 40 million won, which will largely reduce the consumers' financial burden.”

A Hyundai Casper races on a highway [HYUNDAI MOTOR]

Global automakers are competing to release low-cost EVs to meet the anticipated demand, with Tesla CEO Elon Musk boasting his plan to release an EV that costs $25,000 soon.

Kia will unveil its EV5 SUV, the cheaper model of EV6, in Korea on Oct. 12. It was first introduced in China earlier in this year at 159,800 yuan ($22,200).

Kia is also developing an EV3, an EV that will be even smaller than the EV5.

Hyundai Motor will introduce an electric version of the Casper, a small SUV, next year.

Volkswagen is also developing an ID. 2, a small SUV, with a goal of releasing it at cheaper than 25,000 euros ($26,170).

“The introduction of low-cost EVs will be a critical crossroad for Hyundai Motor,” said Kim Pyeong-mo, an analyst at DB Financial Investment. “If sales continue to remain sluggish, market concerns for Hyundai's EV strategy will naturally increase.”

BY SARAH CHEA, KANG KI-HEON [chea.sarah@joongang.co.kr]