“How will Hyundai Motor Company respond to Tesla’s price cut and tax deduction exclusion?”
On the 13th, an article with this title was posted on Reddit, the largest online community in the United States. That’s the same day Tesla announced a price cut of up to 20% in the US market. This article was posted on Reddit’s ‘Ioniq 5’ bulletin board, a bulletin board where people who are owners of Ioniq 5, a pure electric car of Hyundai Motor Company, are waiting for shipment, or are thinking regarding purchasing. The author says: “I really like the Ioniq 5. But the $53,000 (newly priced) Tesla Model Y tilts me to the darkside. Hey Hyundai, how much do you want my money?”
On the 13th, when Tesla made a massive price cut in North America, an article titled “How will Hyundai Motor Company react” was posted on Reddit, an online community in the United States. Reddit homepage capture
It was an article to the effect of expecting that Hyundai Motor Company would give an additional discount as Tesla, the leading electric vehicle company, has significantly lowered the price. More than 300 comments were immediately posted. One netizen who appears to have received a tax credit for purchasing the Ioniq 5 before the implementation of the US Inflation Reduction Act (IRA) said, “I love my Ioniq 5, but the only reason I chose it instead of (Tesla’s) Model Y was the price. I’m glad I bought it when the tax credit was available. Now the Model Y all-wheel drive (AWD) is cheaper than my Ioniq 5 Limited (top trim).” There are also people who will try to renegotiate with the dealer who sold the car to them. “I signed a contract with the Ioniq 5 yesterday with a ‘dealer markup (additional margin received by car dealers in the US)’ of $3,000. When the car comes out later, I will use the Tesla (price cut) news as a bargaining chip and try to lower the price”.
Tesla or Hyundai? In many ways, it seems that American consumers who want to buy an electric car are in a happy state of mind while at a loss. On the 13th, Tesla cut the Model 3 Performance by 14% from $62,990 to $53,990, and the Model Y long range price by 20% from $65,990 to $52,990. Models S and X are also 10-15% cheaper, respectively.
The followingmath of Tesla’s ‘chicken game’ on the North American electric car market is not small. ‘Standard’, the cheapest grade of Hyundai Motor Company’s Ioniq 5, costs $41,450 in the United States. The Model 3 standard price, which is a Tesla entry-level vehicle, has been reduced by $3,000 from $46,990 to $43,990 this time, but it is still more than $2,000 more expensive than the Ioniq 5. However, Hyundai Motor Company, which does not yet have an electric vehicle plant in the United States, cannot receive tax credit under the IRA regulations that came into effect in August of last year. Tesla doesn’t. Applying the $7,500 tax credit to the Model 3 Standard, the final price is $36,490, which is $4,960 cheaper than the Ioniq 5. If you put it in won, it’s 600 won money. It is natural that the hearts of consumers who have put the Ioniq 5 in their shopping carts are shaken.
This is why the analysis that Tesla has lowered the price to below $55,000, which is subject to tax deductions in pursuit of IRA benefits, is cited in the first hand. As a result, the price range of Tesla’s flagship lineup has dropped from $50,000 to $60,000 to $40,000 to $50,000 (up to $30,000 with IRA benefits). It is at that price range where latecomers to electric vehicles such as Hyundai Motor Company’s Ioniq 5, Kia EV6, Volkswagen ID.4, and Ford Mach-E are lined up.
Comparison of discounts by Tesla model
Is it just electric cars? Internal combustion engine vehicles are also affected. Hyundai Sonata, Toyota Camry, Honda Accord… . The price of these models, which are firmly established in the North American mid- to low-priced passenger car market, ranges from regarding $20,000 to mid- to $40,000. In the United States, it has been considered a family car that the middle class with a moderate income can get without much burden. On the other hand, Tesla still has a strong perception that it is a car driven by people with ‘high income’ and ‘early adopter’ tendencies. However, with this price adjustment, the Model 3 and Y have come down to a weight class that appeals to middle-income consumers as well. It doesn’t even cost gas, and it has convenient software (autonomous driving system). This is a point where competitors who have supplied cost-effective vehicles to the US market have no choice but to be nervous.
Interest rates are already high these days, but everyone wants a car that is cheap even for a penny. Let’s move on to China for a moment. In China, Model 3 is 265,900 yuan (regarding 49 million won) to 229,900 yuan (regarding 42 million won), regarding 13%, and Model Y is 288,900 yuan (regarding 53 million won) to 259,900 yuan (regarding 48 million won). ) is regarding 10% cheaper. Thanks to this, Tesla’s sales in China increased by 76% compared to the previous year. These are not Chinese companies to stand by. Cyris, a Chinese electric vehicle company, immediately started pursuing discounts by lowering the lowest price of ‘Aito’ to a level similar to that of Model Y. Across the Pacific, it’s no wonder that American consumers have expectations.
Hyundai Motor Company Ioniq 5. Provided by Hyundai
However, traditional automakers, including Hyundai, are still in a ‘wait and see’ atmosphere. When asked if the price was revised in the North American market, a Hyundai Motor official said, “There is no specific plan to respond.” That’s right. Now, it’s getting news by suddenly lowering the price, but rather, Tesla has only steadily raised the price in the last 1-2 years, when ‘Carflation (vehicle price inflation)’ was extreme. It was to the extent that complaints such as “a car that lives in a city” and “Hoesla” came out. Now that they are pulling down as much as the increase, they are wondering if there is a need to follow this whim. Opposition from existing borrowers must also be taken into account. Paul Philpott, head of Kia’s UK subsidiary, recently told the foreign press, “Tesla’s actions can have a dangerous impact on the residual value of vehicles in the long run.” He said a cut is not being considered.
The domestic EV market is still quiet. Of course, Tesla also made overall adjustments in Korea, such as lowering the Model 3 from 70.34 million won to 64.34 million won. However, even this belongs to the relatively expensive axis, so there is no news of competing brands chasing discounts. However, it seems that the Korean market will not remain a windless zone of the ‘electric car war’ triggered by Tesla forever. This year, domestic cars such as Hyundai Kona EV Ioniq 7 and Kia EV9, as well as electric vehicles from prominent companies such as Audi A6 Etron, BMW i7, and Volvo Polestar 3 are scheduled to be released. BYD, which has dominated the Chinese domestic market, is also regarding to enter the Korean market in the second half of this year with mid- and low-priced models. As the range of choices is increasing in Korea, which is called the ‘test bed’ of the global electric vehicle market, wouldn’t it be nice to expect fierce price competition and cost benefits? Earlier, the Reddit writer also added: “It will be awesome to see Tesla’s price offensive change the EV market”. In 2023, we hope that Korean consumers will be able to meet cool electric cars at reasonable prices.
