It’s been a rough start to the year for Tesla Inc. in South Korea. With just one car sold in January 2024, the renowned electric vehicle (EV) manufacturer is facing a significant setback in one of its key markets. This solitary sale marks Tesla’s worst month in South Korea since July 2022, when the company couldn’t move a single car, according to data compiled by Seoul-based researcher Carisyou.
The Broader Decline in EV Registrations
Tesla’s woes are not isolated; they reflect a broader trend affecting the entire EV market in South Korea. Data from Carisyou and the Korean trade ministry paint a grim picture, revealing an 80 percent decline in new EV registrations in January compared to the previous month. The challenges facing the EV industry in South Korea are multifaceted, ranging from safety concerns to high prices, rising interest rates, inadequate charging infrastructure, and the anticipation of government subsidies.
Unique Challenges Facing Tesla
Tesla faces additional hurdles unique to the South Korean market. While the company’s China-made Model Y SUV saw strong sales in 2023, January’s performance suggests a changing landscape. Lee Hang-Koo, head of the Jeonbuk Institute of Automotive Convergence Technology, speculates that early adopters may have already purchased EVs, leaving mass-market consumers more cautious about making the switch.
Furthermore, Tesla’s association with China has sparked concerns among some South Korean consumers about manufacturing quality. Combined with fluctuations in demand throughout the year, these factors likely contributed to the lackluster sales in January. Tesla itself acknowledges this trend, noting that many potential buyers delayed their EV purchases in anticipation of government subsidies.
Navigating Regulatory Hurdles
In addition to market dynamics, Tesla must contend with regulatory challenges in South Korea. Changes in subsidy criteria for 2024 have further reduced subsidies for Tesla’s Model Y by half, adding to the company’s woes. Notably, in July 2023, the selling price of the China-made Model Y dipped just below the threshold required for a full government subsidy, affecting its competitiveness in the market.
Addressing Safety Concerns and Infrastructure Needs
Safety concerns, particularly incidents of battery fires, have cast a shadow over EV adoption in South Korea. High-profile incidents like an EV catching fire in a Busan parking lot in 2022 have heightened awareness of safety issues. Moreover, the scarcity of fast-charging infrastructure remains a significant barrier to widespread EV adoption, with about 90 percent of charging stations equipped with slow chargers.
Government Initiatives and Future Prospects
In response to these challenges, the South Korean government is exploring strategies to promote EV adoption while tackling safety and infrastructure concerns. Plans to focus on China’s lithium iron phosphate (LFP) batteries, despite their lower energy density compared to high-performance nickel-cobalt-manganese (NCM) batteries, highlight efforts to enhance the quality and safety of EVs in the market. Proposed revisions to EV subsidies aim to incentivize the use of batteries with higher energy density.
Looking ahead, despite the current hurdles, there is optimism that the market will rebound once regulatory uncertainties are addressed and infrastructure improvements are made. Lee Hang-Koo suggests that the sluggish demand observed in January could be partly attributed to consumers waiting for government subsidies. This hints at potential growth opportunities for Tesla and other EV manufacturers in South Korea once these challenges are overcome.
