Domestic automobile and battery manufacturers are expected to face difficulties in improving performance this year due to the electric vehicle chasm and the aggression of Chinese companies. Additionally, the president-elect of the United States, Donald Trump, who will be inaugurated on the 20th, has stated that he plans to reduce support for electric vehicles and impose universal tariffs, leading to increasing calls for the automobile and battery industries to respond swiftly.
Kim Dong-myung, president of LG Energy Solution, the top domestic electric vehicle battery company, said in a New Year's message announced on the 2nd, "The business environment this year is also very difficult. We will continue to face unprecedented challenges." Choi Joo-sun, president of Samsung SDI, noted, "The expansion of uncertainty due to the Trump administration's second term, as well as instability in the international situation, has led to a management environment that is more severe than ever."
Sales of completed cars, which are the upstream industry of battery manufacturers, are expected to shrink compared to last year. The Korea Automobile and Mobility Association (KAMA) released a report last month predicting that this year's completed car exports will decrease by 3.1% year-on-year to 1.66 million units. Domestic sales are expected to increase by only 1.3%, resulting in a total production decrease of 1.4% year-on-year to 4.07 million units, marking a decline for the second consecutive year.
The electric vehicle chasm, which has directly impacted the poor performance of automobile and battery manufacturers, is expected to persist this year. According to KAMA, global electric vehicle sales rose by 113% in 2021 compared to the previous year, but slowed to 61.2% in 2022 and 25.8% in 2023. From January to September last year, electric vehicle sales increased by only 17.5% year-on-year.
The inauguration of Donald Trump's second administration is expected to further contract the electric vehicle market. According to Reuters, Trump's administration's transition team is seeking to repeal the regulations that provide subsidies of up to $7,500 for electric vehicles under the Inflation Reduction Act (IRA). The IRA is a bill that provides subsidies for batteries produced in the U.S. and electric vehicles equipped with them.
On the 1st (local time), the U.S. Department of Energy included Hyundai Motor Company's Ioniq 5 and Ioniq 9, Kia's EV6 and EV9, and Genesis' GV70 among the models eligible for IRA subsidies. However, if the subsidy regulations are repealed or revised following the inauguration of Trump's second administration, the effects of the subsidies will inevitably diminish.
If the universal tariffs of 10% to 20% that Trump is considering come into effect, automobile exports will be affected. The Korea Institute for Industrial Economics and Trade forecasts that if the universal tariffs are imposed, exports of Korean automobiles and secondary battery manufacturers to the U.S. will decrease by 2.7% and 6.7%, respectively.
Competition with Chinese electric vehicle manufacturers is also expected to be challenging. BYD, a representative electric vehicle manufacturer in China, has recently established local factories in Europe, Southeast Asia, and Latin America to expand its global market share. BYD plans to begin sales in South Korea as soon as it receives certification from the Ministry of Environment. Having spent a long time developing quality competitiveness as an electric vehicle and battery manufacturer, there is a high possibility that prices will be set at affordable levels, putting Hyundai and Kia in a situation where they must also consider protecting their domestic market.
Since the end of last year, automobile and battery manufacturers have begun to change their strategies in response to poor market conditions and various domestic and external uncertainties. SK Group, Hyundai Motor Group, and LG Group are strengthening their lobbying workforce in the U.S. in response to the inauguration of Trump's second administration. In the personnel changes of Hyundai Motor Group's board of directors carried out in November last year, former U.S. Ambassador to South Korea Sung Kim was appointed as president in charge of strategic planning, and Jose Munoz, head of the North American region, was promoted to CEO.
Hyundai Motor Group is also revising its initial plans for the eco-friendly vehicle exclusive plant 'Metaplant America' built in Georgia, USA, to reduce the production proportion of electric vehicles and increase the production of hybrid vehicles. This shift is in response to the heightened possibility of market contraction for electric vehicles due to the inauguration of Trump's second administration, as the company aims to focus on the production of hybrid vehicles, which have seen recent increases in demand.
Battery manufacturers are also planning to recover their poor performance by cutting unnecessary expenses instead of making new investments. Kim Dong-myung, president of LG Energy Solution, said, "The electric vehicle market will continue to experience a chasm for the time being, and recovery is more likely to occur after 2026," adding, "Given the difficulty in generating meaningful revenue, efforts should focus on short-term cost reductions."