Demand for electric vehicles is decreasing in South Korea due to a slowing economy and is forcing local manufacturers Hyundai and Kia to cut the prices of their electric models. This comes after the government decided to expand its subsidy to more expensive models.

Whereas electric vehicles continue to become more popular in Europe due to changes in policy and an ever-larger offer, the average South Korean does not seem as enthusiastic. According to Bloomberg, fewer EVs have been sold in South Korea in the first eight months of 2023 than last year. A slow economy and the high purchase price of an EV are said to be the reasons for this decline.

The higher price ceiling for subsidy

To combat this, the South Korean government has expanded its EV subsidy. Whereas previously, a maximum car list price threshold of 55 million won (€38 500) was implemented for the total 6,8 million won (€4 765) subsidy, the limit has now been raised to 57 million won (€39 940).

The criteria for this subsidy also include vehicle performance and efficiency, after-sales service, and charging infrastructure implemented by the manufacturer, de facto giving the advantage to local brands Hyundai and Kia.

Hyundai and Kia lower their prices

But the initiative isn’t just coming from the government. Hyundai and Kia also lower their electric model prices (Hyundai Ioniq 5, Ioniq 6, Kona EV, and Kia’s EV6 and Niro EV). These discounts will run until the end of 2023 to fully use the subsidy expansion. With the deal in place, a Hyundai Ioniq 5 can be had from 46 million won (€32,213), compared to €54,499 in Belgium.

This price cut could trigger a price war in South Korea, similar to what China has seen recently. Especially since foreign brands like Tesla and VW don’t get the same advantage from the government’s subsidy, which forces them to slash their prices even more.