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European shift toward cheap, compact EVs poses challenge, chance for Korea

Published: 18 Nov. 2025, 07:00

The Volkswagen Every1 is on display at the Volkswagen booth during the opening of IAA Mobility in Munich on Sept. 9. [AP/YONHAP]

The global EV market is undergoing a major shift, as the market, once dominated by large, high-end models, is now trending toward compact and budget-friendly options — especially in Europe, where regulators are hoping to encourage sales with eased restrictions.

Industry experts say Korean automakers must also expand their small EV lineups to stay competitive in this changing landscape.

The European Commission is set to announce new regulatory standards for compact, affordable EVs on Dec. 10, according to the auto industry on Wednesday. The move would ease the uniform safety and technical requirements that currently apply to all passenger vehicles, allowing manufacturers to cut production costs for smaller models.

“We plan to lower entry barriers for small EVs by relaxing excessive regulations that have led to high production costs, and help restore the price competitiveness of European-made EVs,” said a European Union official.

The shift is largely seen as a defensive strategy against China’s rapidly growing presence in the European EV market. In the first half of this year, about 340,000 Chinese-made EVs were sold in Europe — a 91 percent surge on year. Their market share nearly doubled, from 2.7 percent to 5.1 percent.

Last October, the EU imposed tariffs of up to 45.3 percent on Chinese EVs in an attempt to curb sales. However, automakers like BYD have continued expanding their influence with low-cost production and large-scale supply capabilities.

The new Renault Twingo EV is unveiled during a media preview presentation in Ivry-sur-Seine near Paris on Oct. 31. [REUTERS/YONHAP]

Some companies have even established local production facilities. BYD is building a new plant in Hungary, targeting mass production by 2026, while Chery is setting up an assembly site near Barcelona.

European automakers are also moving quickly in response. At the IAA Mobility auto show in Munich, Germany’s Volkswagen Group unveiled four compact EV models priced around 25,000 euros ($29,000), signaling its official entry into the affordable EV segment.

Volkswagen is also reviewing the development of an even cheaper city EV, according to local reports. Renault is preparing a successor to its compact Twingo EV, and Stellantis — maker of Fiat and Peugeot — is expanding its lightweight EV platform offerings.

Korean automakers are beginning to adapt to the shift as well. Hyundai Motor is pushing its Kona EV in the European market, while Kia has followed up on its EV3 release earlier this year by accelerating the development of two entry-level models — the EV2 and EV1.

The Kia EV2 concept car is seen in this image provided by Kia [KIA]

Hyundai and Kia currently lack a model that fits the EU’s proposed entry-level EV price range of 15,000 to 20,000 euros. However, analysts believe Kia’s EV1 has strong potential as a Europe-focused strategic model. The EV1 will reportedly be the smallest among Kia’s EV lineup and is likely to launch as a hatchback.

Experts say the EU’s policy shift signals more than just a downsizing of vehicles — it marks a qualitative transformation of the EV industry.

Where the early EV race was driven by environmental regulations and technology, the focus has now expanded to price competitiveness, supply chain restructuring and national interests. With economic slowdowns and weakening consumer demand, high-end EVs are losing traction, while practical, affordable models are gaining prominence.

“This deregulation effort will directly support the expansion of EV adoption across Europe,” said Cho Chuel, a senior researcher at the Korea Institute for Industrial Economics and Trade. “It will also give European automakers the foundation to produce EVs at more accessible price points more efficiently.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY PARK YOUNG-WOO [[email protected]]