In May 2023, Hyundai announced a local investment of KRW 2 trillion (approximately USD 1.52 billion) to establish an EV factory in South Korea, with a groundbreaking ceremony held on November 13. The factory is expected to be completed in 2025, with electric vehicle production set to commence in the first quarter of 2026.

The initial production capacity is planned at 200,000 vehicles per year, focusing on electric SUVs under Hyundai’s premium brand, Genesis.

TrendForce’s Insights:

1. IONIQ 5’s High Cost-Performance Welcomed in the North American Market, Serving as a Pillar for Hyundai’s Electric Vehicle Endeavors

The IONIQ 5, built on Hyundai’s E-GMP platform, boasts an 800V charging infrastructure and a 3.5-second acceleration from 0 to 100 km/h, all priced around USD 40,000. In comparison to other 800V competitors in the North American market, such as the Audi e-tron GT, Lucid Air, and Taycan, which are priced at approximately USD 80,000 to 100,000, the IONIQ 5 stands out with competitive features.

South Korea demonstrates a significant level of self-sufficiency in the strategic components of electric vehicles. Battery suppliers Samsung SDI and LG Energy Solution (LGES) rank among the world’s top ten battery suppliers.

Additionally, Hyundai Mobis stands as South Korea’s largest automotive parts supplier, offering a comprehensive product line that includes various components in electric motors and controls. With robust support from a powerful supply chain, this enhances Hyundai’s market competitiveness.

According to Hyundai North America’s reported sales figures for August 2023, the IONIQ 5 and IONIQ 6, both built on the E-GMP platform, collectively sold 5,235 units in the North American market. This reflects a remarkable 245% growth compared to the same period in 2022.

The year-to-date total sales of the IONIQ 5 and 6 reached 28,000 units by August, showing a notable 63% growth compared to the same period last year. It’s noteworthy that these achievements were made without the benefit of the USD 7,500 subsidy under the “Inflation Reduction Act.”

The success of the IONIQ series has bolstered Hyundai’s confidence in making this platform a core element, facilitating the development of related models and further investments in the electric vehicle business.

2. IONIQ Temporarily Pauses Entry into Chinese Market Amidst Intense Homogeneous Product Competition

With the rise of local Chinese automotive brands and the trend toward electrification, Hyundai’s sales in the Chinese market have plummeted from 1.14 million vehicles in 2016 to 250,000 vehicles in 2022, as per data released by the China Association of Automobile Manufacturers.

In 2021, Hyundai sold its first factory in Shunyi to Li Auto, and in June 2023, Hyundai announced plans to sell two more of its remaining four plants.

In the electric vehicle sector, the IONIQ 5 is built on an all-new electric vehicle platform, outperforming earlier models based on oil-to-electric conversion platforms in both overall efficiency and performance. With its affordable price, it presents a formidable challenge to equivalent models in Europe and the United States.

However, given China’s early development of new energy vehicle platforms and the completion of pure electric vehicle platforms by many domestic manufacturers, coupled with highly autonomous supply chains, IONIQ does not enjoy overwhelming advantages in China. Therefore, the initial focus on the European and American markets is a strategically sound decision.

As European and American automakers continue to establish pure electric vehicle platforms and competitors like Audi and Stellantis strengthen their technological exchanges with Chinese manufacturers, the advantages of the E-GMP platform will face challenges. To further enhance the economic scale of their products, the Chinese market remains a crucial challenge that Hyundai cannot ignore.

Xiaomi’s venture into automotive industry takes a significant stride as the company’s latest models, SU7 and SU7 Max, makes its debut in the latest catalog from China’s Ministry of Industry and Information Technology. The listed entity is Beijing Automotive Group Co., Ltd. (BAIC), marked by the distinctive “Beijing Xiaomi” emblem on the rear.

Sources from Xiaomi’s car supply chain suggest an imminent small-scale trial production phase, hinting at the first model’s market introduction in February 2024, reported by UDN News.

As per the disclosure, the cars boast a 3,000mm wheelbase. SU7 will feature Fdbatt’s lithium iron phosphate batteries, and SU7 Max is complemented by CATL’s ternary lithium batteries. Interestingly, the smart driving features will not include an optional optical radar package.

The catalog showed Xiaomi’s car brand as Xiaomi, while the declared corporate entity is Beijing Automotive Group Off-Road Vehicle Co., Ltd. (BAIC ORV). The product’s rear proudly displays “Beijing Xiaomi.”

Despite leveraging BAIC’s production qualifications, Xiaomi’s car has its declared production address at the site of its self-established factory.

The car factory’s construction unfolds in two phases, with the first, covering approximately 720,000 square meters, achieving an annual capacity of 150,000 vehicles by June 2023. The second phase is slated to commence in 2024, concluding in 2025. Public records confirm the successful acceptance inspection of Xiaomi’s car first phase factory workshops on June 12.

Xiaomi Group Chairman Jun Lei’s October announcement highlighted smooth progress, anticipating an official launch in the first half of 2024.

Since Lei’s announcement of Xiaomi’s foray into smart cars, industry observers have closely monitored Xiaomi’s car dynamics. Internal sources reveal that Xiaomi’s car will leverage ICT industry experience to enhance operational efficiency across research, production, supply, and sales.

Xiaomi plans a US$10 billion investment in the automotive sector over the next decade. Operating in a wholly-owned model, Xiaomi aims to provide users with a comprehensive smart ecosystem and enrich their smart living experiences.

At the October Xiaomi product launch, the introduction of the HyperOS was a highlight, applicable not only to mobile devices but also set to feature in Xiaomi’s cars.

A notable addition revealed by National Business Daily, citing a supplier who visited Xiaomi’s car factory, is that the four major manufacturing process production lines (stamping, welding, painting, and final assembly) in Xiaomi’s car first phase factory are operational, engaging in small-scale trial production. With mass production scheduled to commence in December, Xiaomi’s car is poised for market launch in February next year.

(Image: China’s Ministry of Industry and Information Technology)

According to the article written by Tony Chen, Head of Investment Research at UBS Asset Management, the European Commission initiated an investigation in October into Chinese electric car manufacturers suspected of receiving national subsidies. The EU believes that Chinese state subsidies will create an “unfair trade competition environment” for EU electric car manufacturers.

If the EU’s investigation uncovers “subsidy evidence,” it will result in the calculation of corresponding “average anti-subsidy taxes,” which will apply to all electric vehicles imported from China, including prominent models produced in China such as Volkswagen, Tesla, BMW, and others.

The UBS research team suggests that, in the worst-case scenario, the EU may impose additional tariffs on Chinese electric cars imported into the EU.

What led to the trade conflict between China and the EU in electric vehicles? Firstly, the disparity in tariffs plays a crucial role.

Currently, Chinese cars entering the European market face a 10% import tariff, while in China, the situation is reversed, with a 15% tariff imposed on cars imported from Europe. This significant gap indicates potential room for negotiation.

Additionally, a report from the European Commission reveals that China’s market share for electric vehicles in Europe has risen to 8%, with expectations to reach 15% by 2025.

However, this figure includes cars manufactured in China for international brands, not exclusively domestically produced Chinese electric vehicles. According to JATO, an automotive industry research organization, the market share of “pure” Chinese brand electric vehicles in Europe was still below 1% as of the first half of this year. Nevertheless, overall, it underscores the strong presence of Chinese-manufactured electric vehicles in Europe.

From a practical standpoint, initiating a trade war in the electric vehicle sector involves consideration of various complex background factors. China is not only a primary supplier of raw materials to Europe but also a crucial market for European brands. In fact, China is already the world’s largest sales market for electric vehicles.

Chinese Electric Cars Enjoy High Margins, Positioned for Price Wars

The research team at UBS believes that, given the potential to boost sales through lower pricing, the competitive pricing of electric vehicles between Chinese and European brands will be crucial. Taking Tesla as an example, the company has adopted an aggressive pricing strategy for its EVs. In April, Tesla lowered the selling prices in the European region, with the retail price for the popular Model Y around €46,000. According to JATO, the Model Y is currently the best-selling EV in the European Union this year, showcasing the positive impact of a competitive pricing strategy on sales.

Following this argument, another set of data from JATO reveals that the selling prices of Chinese brand EVs in Europe range from €50,000 to €60,000, approximately in line with the European average.

In comparison, the average selling price of Chinese EVs domestically in China is only around €30,000. This indicates that Chinese EV manufacturers exporting to the European market enjoy relatively higher margins, providing them with the capability to engage in price wars. One major reason for the cost advantage of Chinese electric cars lies in battery manufacturing.

According to a previous report by TrendForce, Chinese battery manufacturers command a global market share exceeding 60%, allowing them to cover the entire battery production chain, share production costs, and continually advance new technologies. Since batteries represent approximately 40% of the total vehicle cost, Chinese electric cars offer superior cost-effectiveness.

On the other hand, the space for European car manufacturers to gain a competitive advantage through subsidies has gradually diminished. As the EV market expands, government subsidies in Europe are losing momentum. Germany has already reduced EV subsidies from €5,000 per vehicle to €3,000 this year.

Similarly, subsidies in the Netherlands, of a similar scale, are subject to quota limitations and were even exhausted by mid-2022. This implies that entering a price war could place European EVs at a relative disadvantage.

Overall, the EV market exhibits high price sensitivity, and European automakers face challenges in terms of cost competitiveness. In contrast, Chinese EV manufacturers have a cost advantage. Consequently, there is a growing possibility of a trade conflict in the European electric vehicle market.

(Photo credit: Pixabay)

Ford announced the withdrawal of its full-year financial forecast due to the impact of the recent labor strike and ongoing challenges in the EV sector. Most consumers are reluctant to pay higher prices for electric cars compared to traditional or hybrid vehicles. Ford also postponed its planned $12 billion investment in expanding electric vehicle production capacity but remains committed to its goal of advancing its electric vehicle business.

TrendForce’s Insights:

1. Slower Market Demand Spurs Automakers to Rethink EV Strategies

The United Auto Workers (UAW) union initiated a six-week strike in Detroit starting on September 15, 2023, motivated by demands for improved compensation and benefits. The strike came to an end when consensus was reached with Ford, Stellantis, and GM (General Motors), resulting in the signing of a new contract.

According to predictions from Deutsche Bank, this new agreement will add an estimated $6.2 to $7.2 billion in costs for each of the three major automakers. This cost increase is nearly equivalent to the expense of building an electric vehicle platform. Compounded by the impact of slowing demand for global new energy vehicles (BEV and PHEV), with growth rates decreasing from 54% in 2022 to 30% in 2023, Ford announced the suspension of its $12 billion electric vehicle investment plan. This plan includes its partnership with SK On for a battery factory and a partly reduction in production capacity for the Mustang Mach-E.

2. Automakers Must Adopt More Practical EV Development Strategies to Address Price and Range Concerns

The slowdown in electric vehicle market demand stems from the issues of high vehicle prices and range anxiety, which affect consumer willingness to make a purchase. Addressing these two problems requires increasing battery energy density to achieve comparable driving range to conventional vehicles and constructing an adequate charging infrastructure. However, achieving these goals will take time and effort.

With range anxiety still unresolved and the goal of banning fossil fuel vehicles unchanged, automakers positioned between policy and the market face transition risks. At this juncture, choosing to independently develop electric vehicle platforms might add financial burden and risk, with the associated costs reflected in vehicle prices, potentially eroding competitiveness. A more practical approach would involve considering alternative development strategies, such as exploring platform outsourcing to reduce manufacturing costs.

Automakers or Tier 1 suppliers with proprietary electric vehicle platforms have the option to lease their platform production capacity to companies that are currently unable or unwilling to independently develop their own platforms. This strategy can increase production efficiency for lessees, allowing them to commission the production of all or some of their electric vehicle models from the lessor, ultimately reducing manufacturing costs and accelerating the release of new vehicle models.

By doing so, companies can maintain their market share in the electric vehicle race while waiting for the right opportunity to reevaluate the potential for developing their own electric vehicle platforms. In summary, as the demand for electric vehicles slows down, automakers will face tighter financial constraints, making it crucial for them to explore how to collaboratively leverage existing resources to create electric vehicles that align with market demands.

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• [News] Ford Shifts EV Investment Focus Amidst Fierce Price Competition

(Photo credit: Ford’s Facebook)

According to Yahoo’s report, recent developments in China’s automotive industry, particularly the electric vehicle sector, have been a mixed bag. While some companies have reported impressive export performance and surging delivery volumes, the overall market has faced challenges due to weak consumer demand and intense price wars.

Even NIO, which had previously pledged to enhance efficiency without layoffs, recently announced a workforce reduction of approximately 10%, affecting around 3,000 employees. This unexpected move has sent shockwaves through the industry and suggests that a layoff storm may be approaching the Chinese automotive sector.

Amidst numerous recent developments in the Chinese auto market, the most widely discussed topic is the announcement by NIO’s Chairman, William Li, regarding a workforce reduction of approximately 10%, with specific adjustments to be completed by November.

NIO, known as a market favorite and listed in both the U.S. and Hong Kong, has been considered one of the leading players in China’s new force of automotive companies. However, it now finds itself in the challenging position of staff downsizing, signaling a potentially tough year-end for China’s automotive industry.

While NIO, XPeng, and Li Auto, often hailed as representatives of the new forces in China’s automobile industry, had been at the forefront, NIO’s performance in 2023 seems to be lagging behind its peers.

In contrast to Li Auto, which has seen ten consecutive months of rising sales figures this year, and XPeng, which achieved a 292% year-on-year increase in October and set its record for single-month deliveries, NIO’s performance has been more volatile. Since reaching a peak delivery volume of 20,462 vehicles in July, NIO has struggled to maintain a consistent delivery rate of 20,000 vehicles per month.

Additionally, NIO’s losses have continued to grow quarter by quarter, with the company posting over ¥20 billion in net losses over the past year. In the same period, Li Auto recorded nearly ¥2 billion in profits, while XPeng faced losses of nearly ¥10 billion. Consequently, NIO holds the distinction of being the leader in losses among the new energy vehicle manufacturers. NIO’s layoffs serve as a cautionary signal, highlighting the pressing need to cut costs and enhance efficiency.

Amid China’s economic slowdown and intensified market competition, NIO’s challenges represent just a microcosm of the broader Chinese automotive industry. It’s not just NIO; in 2023, several automotive companies have already begun layoffs or faced closures. Examples include Levdeo, which filed for bankruptcy; WM Motor, which already closed its doors; and Enovate, which announced a suspension of operations.

Furthermore, the chill in the market is also affecting automotive supply chain companies. An industry insider candidly revealed that except for BYD and Li Auto, most car manufacturers are in the process of downsizing, indicating that the Chinese automotive industry is currently experiencing a major shake-up and a fierce battle for survival.

(Photo credit: Pixabay)