Will Tesla’s Shanghai-made Model 3 shake up Korea's EV market?

Industry

Published: 23 Jan. 2024, 16:01

Will Tesla’s Shanghai-made Model 3 shake up Korea's EV market?

Tesla CEO Elon Musk waves as he arrives at a festival in Rome, Italy on Dec. 16. [AP/YONHAP]

Shanghai-made Tesla Model 3s will soon be hitting Korean roads, heralding another upheaval in the country’s cutthroat EV market.

Tesla recently finished the emissions and noise certification process for its facelifted Model 3, the first new model in six years, according to the Environment Ministry on Tuesday.

The certification is the mandatory process to launch new cars in Korea and cars are usually introduced a few months after its completion.

The Model 3s will be available in both rear-wheel and long-range versions, which are both manufactured at the U.S. carmaker’s plant in Shanghai.

The rear-wheel version is powered by cheaper lithium iron phosphate (LFP) batteries by CATL, while the long-range version comes with nickel-cobalt-manganese (NCM) batteries made by LG Energy Solution. LFP batteries are around 30 percent cheaper than NCM batteries.

The rear-wheel model is expected to run 382 kilometers (240 miles) per single charge, with a long-range version of about 488 kilometers per charge.

Visitors inspect a Tesla Model 3 electric car displayed at the 40th Thailand International Motor Expo 2023 in Bangkok, Thailand, on Dec. 4. [EPA/YONHAP]

All eyes are on the price tag of the Model 3 as Tesla is likely to set it to below 55 million won ($41,000) so that it can receive a full government subsidy. The Environment Ministry is currently pushing to offer full subsidies with a sticker price below 55 million won, from the current 57 million won.

Tesla’s low-price strategy has been working surprisingly well in Korea where the Shanghai-made Model Y sold like hotcakes last year. The Model Y was released with a price tag of around 20 million won cheaper than its original price due to the inclusion of more affordable LFP batteries.

A total of 13,885 Model Ys were sold in Korea in 2023, becoming the No.1 imported EV. In overall imported cars, it was No. 3 right after the Mercedes E-Class and BMW’s 5 Series.

China’s presence in Korea is growing rapidly anyway, especially in EVs.

Korea's imports of Chinese EVs stood at $590 million last year, up 255.6 percent on year, becoming the No. 2 country beating the United States for the first time.

“China-made EVs are good quality and they will do well in Korea’s low- and medium-priced EV market,” said Kim Pil-soo, an automotive technology professor at Daelim University College. “As Chinese EVs expand their presence and our dependence on China grows, Korea should prepare thoroughly.”

Meanwhile, the Korean government is currently pushing to revise its EV credit guidelines to keep China’s growth in check and benefit Korean companies.

The new policies include that it will differentiate the amount of tax credits based on EVs' energy density and recyclable value. This will likely benefit Korea-made EVs that come with high-performance NCM batteries rather than those with China's LFP batteries.

The government will announce the revised regulations within the month. They will likely go into effect as early as February.

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