Tesla EVs with cheap Chinese batteries pose headache for Hyundai Motor, Kia

The 2023 Tesla Model Y / AP-Yonhap

Tesla's Model Y equipped with cheap Chinese lithium iron phosphate (LFP) batteries poses a growing threat to Korean electric vehicle (EV) manufacturers, as the best-selling EV from Tesla is meeting the demand created by customers who are seeking more price-competitive eco-friendly vehicles, data showed Wednesday.

According to data from the Korea International Trade Association (KITA), China became the second-largest country last year in terms of EV imports here after Germany. This is a rise of three places from 2021.

This was driven by the unmatched popularity of Tesla's Model Y whose sales last year almost doubled to more than 13,000 in Korea from a year earlier. The Model Y set a new record as the only imported EV here with annual sales of over 10,000. The vehicle is manufactured in Tesla's Gigafactory in Shanghai.

This is in contrast to sluggish sales of EVs from Korean automakers. Sales for Hyundai Motor’s IONIQ 5 topped 9,000 in the first half of 2023, but the figure fell to less than 7,000 between July and November. Kia’s EV6 also suffered falling sales during the same period.

The price competitiveness of the vehicle is considered its key growth driver here, as customers turn their eyes to cheaper EVs manufactured by reliable automakers.

In response, Korea’s major EV makers — led by Hyundai Motor and Kia — are reshaping their strategy to put a brake on the growing popularity of the Model Y by focusing on sales of cheaper EVs this year.

Industry officials said local automakers are also moving to attract more customers with a planned launch of more price-competitive EVs.

"The keywords for the domestic EV industry will be 'reasonable price,'" an official from an automaker here said. “Hyundai Motor and Kia – the two major Korean EV makers – also look to set a new strategy, focusing on sales of cheaper EVs this year, in an apparent move to expand their EV share against the rapid rise of price-competitive imported EVs.”

Hyundai Motor plans to sell its smallest Casper EV this year with a price range of less than 30 million won. Kia is also set to release a smaller EV lineup, such as EV3 and EV4, possibly in the second quarter and the fourth quarter of 2024, in an effort to counter the demand for overseas EVs.