Electric Vehicle Price Wars: How Low Can They Go?

The era of affordable, entry-level electric vehicles is coming
Significantly lower price for cost-effectiveness
How far will the electric vehicle competition go?

The price war for electric vehicles is intensifying. Tesla is steadily lowering the price of Model Y, increasing its competitiveness through an aggressive pricing policy. In South Korea, the cost of Model Y, which was previously 56.99 million won (about $43,282), was reduced to 54.99 million won (about $41,763) in line with the changed electric vehicle subsidies.

Each automaker, led by Tesla, is joining in a price war and making moves to gain market share. Amid such fierce competition, startup companies such as Fisker, Lucid, and Rivian, experiencing financial difficulties, have begun to reduce their workforce by up to 15%.

Tesla prepares to launch electric vehicle priced at about 30 million won (about $22,784)

This trend of price competition is expected to intensify further in the future. In line with this trend, each automaker plans to launch affordable, entry-level electric vehicle models with prices lowered to the level of internal combustion engine vehicles to survive in the market. Tesla plans to launch Redwood, an affordable, entry-level electric vehicle model, by 2026.

The expected price is $25,000, more than  $15,189 lower than the existing Model 3 and Model Y prices. The launch of Redwood, Tesla’s new entry-level model, is expected to be an important turning point in Tesla’s future electric vehicle sales strategy. Tesla is reportedly prioritizing the launch of Redwood instead of preparing to launch a new version of the existing model by 2026.

In Korea, Kia EV3 is a competing model
Enhanced product quality with the latest specifications

In South Korea, Kia plans to launch the EV3, an affordable, entry-level electric vehicle, in the first half of this year. The starting price is expected to be $30,000. The battery is divided into two specifications, 58 kWh and 77.4 kWh, and is provided differently depending on the option. The base model has front-wheel drive single motor specifications, and the higher trims will likely be supplied with dual motor specifications.

Although it is an entry-level electric vehicle with a lower price, it has improved product quality by reflecting Kia’s latest design elements. The front of the car is equipped with vertical headlamps with a design that emphasizes the vehicle’s width and Kia’s Star Map signature daytime running lights, emphasizing its sleek appearance. The prototype’s interior was also revealed, with a wide display integrated with a digital instrument panel, a floating center console, and touch-type buttons.

Lower-Priced Chinese Electric Vehicles
How will the market flow change?

This trend of price competition is also attributed to the aggressive targeting of Chinese electric vehicle manufacturers. They are targeting the global electric vehicle market with electric vehicles equipped with lithium iron phosphate batteries to enhance price competitiveness. BYD expanded its global electric vehicle market share from 7.1% in 21 to 16.5% in 2023, closely following Tesla, which took first place with a 20.8% share.

Recently, the price of the best-selling vehicle, the new Ato 3, was set at 119,800 yuan (about $16,636), an 11.8% reduction from the previous model. Atto 3 is equipped with a 60.5 kWh lithium iron phosphate battery and has a certified driving range of 420 km (about 261 miles) based on WLTP when fully charged. It offers a front-wheel drive single motor specification with a maximum output of 204 horsepower and maximum torque of 31.6kg.m. Attention is being paid to how the chicken game among automakers to secure electric vehicle market share will change the market trend.