Global EV market faces slowdown

The growth momentum of the EV industry, which had been expanding at a fast pace, has been recently brought to a halt. With most of the demand already served by early adopters, long-standing high interest rates, high prices, subsidy reduction, and lack of charging facilities have impacted consumer demand. The trend is fueling uncertainty for Korea’s EV and battery industry, which has been viewed with a high potential for growth comparable to the semiconductor industry.

Volkswagen, the second largest auto company in the world, reported that EV orders from Europe were reduced by half compared to last year at 150,000 units. It canceled plans to build a new plant in Germany. Top 3 U.S. automakers (GM, Ford, and Stellantis) impacted by the recent labor strike and tasked with higher labor cost burdens, cut investments on EVs or delayed new model launch plans. EV leader Tesla saw stock prices decline when its CEO Elon Musk announced operation income drop and demand reduction forecast.

Delayed investments in the global auto industry negatively impact Korean companies planning to manufacture batteries for them. This explains the plummeting stock prices of battery manufacturing companies such as LG Energy Solution, SK ON, and Samsung SDI, as well as battery materials companies. The European Union has enforced stricter restrictions penalizing batteries manufactured outside the EU.

Such a recession is expected to become a turning point to reverse business rankings in the global market. In that regard, the decision of Toyota, nicknamed “late comer to EV,” to make additional investments of 11 trillion won to build a battery plant in North Carolina, is eye-catching. BYD, which is expanding exports based on sales in China, has seen sales jump by 40% in the third quarter year-on-year. It is set to overtake Tesla’s place in new energy cars.

Despite unfavorable market conditions, Hyundai and Kia Motor, the world’s third-largest auto company, have claimed to maintain aggressive investment plans, saying that the EV market will continue to grow, despite some hurdles. Battery companies should benchmark this decision to accelerate the pace of development on solid-state batteries. Korea’s auto industry has shown accelerated growth whenever faced with challenges such as the global financial crisis and COVID-19. They should make use of this opportunity by obtaining top-level competitiveness and re-engineering the global supply network to be prepared for the next bull cycle.