U.S. electric vehicle manufacturer Tesla and Chinese electric vehicle manufacturer BYD are lowering prices significantly for their electric vehicles.

According to the auto industry on 15th, Tesla plans to launch electric vehicles priced below $30,000 (approximately 43 million won) in the first half of this year. Tesla revealed this schedule during an investor relations meeting in early last month. The vehicle known as Model Q is a compact hatchback (a vehicle type that combines the back seat and trunk), expected to have a selling price below $30,000 even without the electric vehicle tax credit under the Inflation Reduction Act (IRA) in the U.S. This price is lower than Tesla's entry-level model, Model 3.

On Nov. 8, customers sit in the Tesla Model Y at the delivery centre of the automobile manufacturer in Beijing, China./Courtesy of Reuters.

Industry observers believe that Tesla is launching Model Q to counter Chinese companies in the European market. Hatchbacks are preferred in Europe, where the roads are narrower than in the U.S. or South Korea, and Chinese companies hold a significant market share in the European electric vehicle market.

BYD plans to launch a new compact electric sport utility vehicle (SUV) called Atto 2 in Europe. This vehicle will be the mid-size option between the compact hatchback Dolphin and the midsize electric SUV Atto 3. Atto 2 measures 4.3 meters in length, 1.8 meters in width, and has a wheelbase of 2.6 meters, making it smaller than Dolphin and Atto 3. A BYD representative noted, "It will be a model positioned between Dolphin and Atto 3."

The price of Atto 2 is expected to be lower than that of Dolphin ($32,000) and Atto 3 ($45,000). With the high preference for compact electric SUVs in the European market, the plan appears to be aimed at increasing market share by launching the new-sized Atto 2. According to electric vehicle data provider CNEV Post, BYD sold a total of 4.27 million units worldwide last year, with expectations to sell 5 million units this year.

The compact electric sports utility vehicle (SUV) BYD Atto 3 (known as Yuan Plus in China)./Courtesy of Baidu.

The two companies have led a price war in the electric vehicle market over the past two years. Tesla opened the door by reducing vehicle prices by up to 19% in January 2023 in the U.S., Europe, and South Korea. A year later, in early last year, BYD unexpectedly slashed vehicle prices by up to 15% in major markets such as Europe and China. Subsequently, many electric vehicle manufacturers, including Hyundai Motor Company, joined the price reduction competition.

An electric vehicle industry insider said, "Over the past two years, companies that aggressively lowered prices to maintain market share are feeling that further reductions are difficult and are flooding the market with low-priced, popular models." They added, "Both Model Q and Atto 2 will be equipped with lithium iron phosphate (LFP) batteries, and due to the security of the battery supply chain at a certain level, it has become possible to introduce low-cost models."

Once the two vehicles are officially launched, they are expected to compete with Kia EV3 in Europe.