Korean EVs face 'chasm' effect as sales slow despite new models, price discounts

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Korean EVs face 'chasm' effect as sales slow despite new models, price discounts

Published: 23 Apr. 2025, 07:00

Audio report: written by reporters, read by AI

Hyundai's Ioniq 5 [HYUNDAI MOTOR]

Concerns are growing that the recent slowdown in electric vehicle (EV) sales in Korea may signal a longer-term slump rather than a temporary lull — known as the "chasm" effect — despite the release of new models and price discounts by manufacturers.

According to the Korea Automobile & Mobility Association (KAMA), domestic EV sales in March totaled 18,708 units, down 7.5 percent from 20,225 units in the same month last year. The drop contrasts sharply with the dramatic year-on-year increase in February, when sales surged 295.7 percent from 3,583 to 14,179 units.

Experts are paying more attention to the March decline than the February spike. Government subsidies encouraging the purchase of EVs were made available to consumers a month earlier than usual in February this year, and automakers rolled out discounts of 2 million ($1,404) to 4 million won per unit. Yet, the sales momentum lasted only a month before tapering off.

Even newly launched EVs struggled. Kia’s EV3, a compact model introduced in July last year, saw sales fall from 8,028 units in February to 6,288 in March — a 21.7 percent drop. Hyundai’s Casper Electric recorded 1,061 units in February and 1,185 in March, but remains below its five-month average of 1,574 units since its launch in August 2023.

“This is a classic case of a short-term sales bump driven by subsidies followed by a sharp decline,” said Cho Chul, senior research fellow at the Korea Institute for Industrial Economics and Trade. “It’s hard to interpret this as a sign of recovery from the past two-year slump in EV sales. As early purchases to secure subsidies taper off in April, sales may drop further — raising concerns of a prolonged domestic downturn in EV demand.”

The export outlook is equally dim. KAMA data shows that in the first quarter, domestic automakers exported 63,933 EVs — a 21.7 percent decrease from the same period last year.

This decline is particularly alarming given the global market is expanding. According to U.K.-based research firm Rho Motion, global sales of EVs and plug-in hybrid electric vehicles (PHEVs) in the first quarter rose 29 percent on-year to 1.7 million units. Major markets all saw growth — China by 36 percent, Europe by 22 percent and the United States by 19 percent.

Industry analysts attribute Korea’s falling exports to increased local production in overseas markets and intensified competition from low-cost Chinese EVs.

China's BYD electric vehicles [SCREEN CAPTURE]

With both domestic and overseas markets being sluggish, production lines in Korea are beginning to feel the impact. Hyundai Motor plans to halt operations on Line 2 of its Ulsan Plant 1 — which produces the Ioniq 5 and Kona EV — from April 24 to 30. The same line was suspended for five days last February.

In the first quarter, Hyundai sold 9,562 units of the Ioniq 5 — 2,585 domestically and 6,977 in exports — down 58.7 percent from a year earlier. Sales of the Kona EV totaled 3,944 units — 900 domestically and 3,044 in exports — a 14.9 percent drop year-on-year.

By contrast, hybrid electric vehicles (HEVs) are performing well, especially in terms of exports. KAMA reported 117,417 HEV units were exported in the first quarter — up 39.4 percent from 84,245 units a year ago.

Hyundai models like the Avante (up 85.3 percent) and Tucson (up 17.9 percent), as well as Kia’s Sportage (up 38.9 percent), Sorento (up 76.2 percent) and Carnival (up 47.8 percent), helped drive the surge. Analysts point to broader trim availability and stronger price competitiveness compared to similar-level EVs as reasons for the rise.

Lee Hang-koo, an adviser at the Korea Automotive Technology Institute, noted that falling EV prices — especially among Chinese brands — are prompting other automakers to lower prices as well.

“Even if the EV chasm eventually closes, domestic manufacturers will face tough margins. They may sell more, but profits will be thin — and that’s a serious concern,” Lee said.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.

BY KIM HYO-SEONG [[email protected]]