There is a growing outlook that the global electric vehicle market could move beyond a chasm—an interim demand slowdown—and sink into a prolonged slump. After the U.S. electric vehicle tax credit ended at the end of September, U.S. electric vehicle sales plunged, and China's growth engine is also seen as weakening after the government recently decided to scale back support for electric vehicles.
ArenaEV, a U.S. online news outlet specializing in electric vehicles, said on the 3rd (local time), citing statistics from JD Power and S&P Global Mobility, that last month's U.S. pure electric vehicle sales fell 57.3% from the previous month to 64,000 units. The share of electric vehicles in total auto sales also dropped sharply over the same period, from 12% to 5%.
Hyundai Motor's U.S. electric vehicle sales last month were 2,503 units, down 58.5% from a year earlier. Kia recorded 1,331 units, down 66.4%. Combined electric vehicle sales for Hyundai Motor and Kia were 3,834 units, down 61.6% from the same period last year.
Ford's electric vehicle sales fell 25% year over year as demand weakened for key models such as the F-150 Lightning electric pickup. The industry assessed that, beyond Hyundai Motor, Kia, and Ford, electric vehicle sales among major automakers likely declined sharply across the board.
The sharp drop in U.S. electric vehicle sales since last month is because the electric vehicle tax credit ended at the end of September. The United States had provided buyers of electric vehicles with a tax credit of up to $7,500 (about 10.8 million won). The tax credit had been slated to remain in place through the end of 2032, but after the Donald Trump administration took office this year, the Republican Party, which holds a majority in Congress, moved up the expiration by more than seven years.
There are also many projections that China's electric vehicle market will lose momentum. Chinese electric vehicle makers had grown rapidly for a long time under government nurturing, but recent issues such as overproduction have prompted the government to move to cut support.
At the 4th plenary session of the 20th Central Committee held last month, the Chinese Communist Party excluded electric vehicles from the 15th Five-Year Plan's list of strategic emerging industries. Strategic emerging industries are sectors to which the Chinese government provides fiscal support and various tax benefits for five years. It is the first time in 10 years, since 2015, that electric vehicles have been removed from the strategic emerging industries.
China's decision to scale back support for electric vehicles comes as the market has been suffering from oversupply and deteriorating financial soundness. BYD, China's largest electric vehicle maker, in June applied double-digit discount rates to most of its sales models to clear massive inventories. Following BYD, other major automakers such as Chery Automobile Co., Geely Automobile, and SAIC-GM joined the discount battle, spreading the recent Chinese electric vehicle market into a "chicken game"—a competition in which both sides take damage until one wins.
An auto industry official said, "China has been inducing self-sustained competition among electric vehicle companies by scaling back subsidies since three years ago," adding, "Going forward, the flow of China's electric vehicle market is likely to focus more on restructuring than on quantitative expansion."
As growth prospects for electric vehicles in the United States and China are expected to weaken, automakers have little choice but to change strategy. General Motors (GM) and Ford have cut electric vehicle investments and expanded investments back into internal combustion engine cars.
Hyundai Motor and Kia have poured large sums of money in recent years into strengthening electric vehicle competitiveness and expanding production. In Oct. last year, they completed Meta Plant America (HMGMA), an eco-friendly vehicle production plant in Georgia, with an investment of $7.6 billion (about 11 trillion won). The plant currently produces only electric vehicles such as the Ioniq 5 and Ioniq 9.
In the industry, many say Hyundai Motor Group should move up the start of hybrid production at Meta Plant America as much as possible. That's because the U.S. electric vehicle market is shrinking rapidly, while demand for hybrids is surging. Last month, combined hybrid sales for Hyundai Motor and Kia were 31,102 units, up 43.5% from the same period last year.