Tesla vs BYD 30 million won entry-level competition is imminent, will Casm finally be resolved?

■ Broadcast: YTN Radio FM 94.5 (09:00-10:00)
■ Host: Reporter Cho Tae-hyun
■ Air date: December 18, 2024 (Wednesday)
■ Talk: Kwon Yong-ju, professor of automobile transportation design at Kookmin University

* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information.

◆ Reporter Cho Tae-hyun (hereinafter referred to as Cho Tae-hyun): The launch of Trump's second term is really about a month away. After he takes office, he will abolish subsidies for electric vehicles and use tariffs as a negotiating tool. As these stories continued to emerge, the Trump transition team's internal documents were confirmed. The industry is on a roll. Meanwhile, Elon Musk's Tesla stock, called First Buddy, continues to soar. Tesla's low-cost model is also expected to come out in the first half of next year. Let's look at various issues surrounding the electric vehicle market. I'll connect you to Kwon Yong-joo, a professor of automobile transportation design at Kookmin University. Is the professor out?

◇ Kwon Yong-ju, professor of automobile transportation design at Kookmin University (hereinafter Kwon Yong-ju): Yes, hello.

◆ Cho Tae-hyun: Yes, hello. These days, if I don't tell you this story first, I feel like something is wrong, so I'll point out this story first. After martial law was issued and in the face of impeachment, what would be the impact on this side of the automobile industry?

◇ Kwon Yong-joo: It's kind of affected. Because usually at the end of the year season, there is a goal that automakers are trying to achieve in a year. In order to achieve that, there is a lot of promotion, but suddenly there is an issue, so the psychology of people who want to buy cars freezes.

◆ Cho Tae-hyun: It's also influenced by consumer sentiment.

◇ Kwon Yong-joo: That's right. So, considering interest rates and various things, I thought, "Oh, I don't know what's going to happen next year," so I basically don't buy it. That's why the number of sales isn't coming out as much as last year.

◆ Cho Tae-hyun: Is it actually confirmed as an indicator?

◇ Kwon Yong-joo: That's right. Because when selling on the front line, they usually release sales data on the number of days, 10 days, 20 days, and 30 days, but it's coming up on the 20th. The number of sales for that 20 days is not much lower than last year. That means that consumers don't really open their wallets. And in fact, after impeachment, there is a temporary contraction of sentiment.

◆ Cho Tae-hyun: Okay. In fact, looking at the various economic indicators that come out in December, I think the blow will be inevitable. Now, back to the full-fledged electric car story. Tesla is also launching a low-cost model. This story has been told for a long time. Does this actually happen in the first half of next year?

◇ Kwon Yong-joo: That's what we're talking about, but usually automakers always worry about is expanding their product line-up. Because we're living with new products. So when I was talking about when a low-priced model would come out, I've been talking about it for about three or four years in the past.

◆ Cho Tae-hyun: That's right.

◇ Kwon Yong-joo: I'll put in a low-cost model. That's what people say that they will be able to introduce the product for sure next year. Then, we don't know when next year will be in the first half or the second half. Because it's been like that until now.

◆ Cho Tae-hyun: There were always delays and delays.

◇ Kwon Yong-joo: I heard last year that Tesla was going to release a low-priced model. But it didn't come out this year.

◆ Cho Tae-hyun: Yes, that's right.

◇ Kwon Yong-joo: So there's always been talk about putting it out, and I can't say for sure when it's time to put it out.

◆ Cho Tae-hyun: Especially Tesla, it's often a little hard to believe until it comes out, so I think we need to look at the situation. How cheap is it?

◇ Kwon Yong-ju: It's probably aimed at Chinese electric cars.

◆ Something like BYD?

◇ Kwon Yong-joo: That's right. Because electric vehicles are now becoming popular. Then the most important thing when it becomes popular is price. Then, if you look at the price of Chinese electric vehicles, the price is not about 30 million won to 40 million won, but is in the late 30 million won. If you receive subsidies here, consumers will be able to purchase about 20 million won. So maybe it's going to match that price and actually the market is getting bigger.

◆ Cho Tae-hyun: Yes, I think BYD is stronger in that low-end model, how much is it over here?

◇ Kwon Yong-joo: There's a part of it that's coming out in the 20 million won range.

◆ Cho Tae-hyun: It's cheap, but it's cheap.

◇ Kwon Yong-joo: They say there's a 10 million won range, but that's a little impossible price. At least 20 million won is formed when subsidies are included, and in reality, the level that consumers buy the most is around 30 million won. Because among the electric cars sold in Korea, 30 million won is not priced. Most of them are over 40 million won. That means when consumers can buy a lot in an entry-level price range, it will be around 30 million won. Maybe Tesla will also try to match that price.

◆ Cho Tae-hyun: How much does it usually cost to buy a Tesla car right now?

◇ Kwon Yong-joo: Now you have to pay around the middle of 40 million won. As much as 49 million won. So the actual amount of money that consumers buy, including all the subsidies, is around 30 million won.

◆ Cho Tae-hyun: It's going to be in the late 30 million won range, and there's a story that it's going to be released in the U.S. market and it's going to be released in Korea at the same time, so how do you figure it out?

◇ Kwon Yong-joo: You can look at our country like this. Most of the Teslas sold in Korea are made in China. But production costs are low in China. If something produced in the United States comes in, the price will inevitably go up. The production course itself is very cheap in China.

◆ Cho Tae-hyun: Well, that's right.

◇ Kwon Yong-joo: So if American products come in, they might lose a little bit of price competitiveness, so they'll probably worry. Tesla might be thinking about whether to use American or Chinese, but if it produces a low-cost model in China, it will definitely use Chinese, but if it is only produced in U.S. factories, can it increase price competitiveness when it is brought in?

◆ Cho Tae-hyun: Can I understand it by saying that it's a low-priced model, but it may not be low-priced?

◇ Kwon Yong-joo: Many people say that low-cost, low-cost, or alternative electric cars are expensive, but they are not around 20 million won. Usually, it's around 30 million won.

◆ Cho Tae-hyun: No matter how low I am, it's 30 million won.

◇ Kwon Yong-joo: Because there's a basic price.

◆ Cho Tae-hyun: There's no choice but to be a certain price because there's something like a battery in it. Therefore, even if it's a low price, you'd better note that it may not be a low price to actually feel it.

◇ Kwon Yong-joo: There are talks about low-cost 20 million won that BYD will come in from China. The price structure doesn't come out like that. So, when you enter Korea, you have to pay tariffs in China.

◆ Cho Tae-hyun: That's right.

◇ Kwon Yong-joo: If you pay 8% of tariffs and individual consumption tax and education tax, the price will rise by about 23% as a tax. In addition, considering the margins of importers and sellers, even if you import 20 million won, it becomes 30 million won. Then you export 20 million won from China? This means that China's BYD exports to Korea at a loss. So, if you say you're going to export even at such a strategic loss, the price will be formed, but if you say you're still not losing money, you can't see that price.

◆ Cho Tae-hyun: Okay. Anyway, interest in electric vehicles continues to grow in the domestic market. Now in Korea, Kia is the No. 1 and Tesla is the No. 2 in Korea. Anyway, if such a mid- to low-end electric car is released in the 30 million won range, what changes or fluctuations in the market can there be?

◇ Kwon Yong-joo: There could be enough. CEO Jim Farley said this to Ford in the past. The race of electric cars is decided by the entry-level type. So it's going to be expensive in the beginning anyway,

◆ Cho Tae-hyun: Yes, that's inevitable.

◇ Kwon Yong-joo: Price competitiveness will be important as it spreads more and more, so I once said that the price range of internal combustion locomotives is the most sold compared to the price of internal combustion engines.

◆ Cho Tae-hyun: How much is the price range?

◇ Kwon Yong-joo: The price range that consumers buy the most in Korea is 31 million won to 2 million won. So, if the actual purchase price of electric vehicles is between 31 million won and 32 million won when subsidies are provided, it can be easily accessed from a consumer's point of view.

◆ Cho Tae-hyun: I can try it, right? I see. In this way, if the mid- to low-priced prices come out, we can detect the possibility of significant fluctuations in the market. Let's look at it in a bigger picture. There are definitely concerns about electric car casism right now. Looking at the delivery of electric vehicles from January to October, it increased by 23.4% worldwide, but excluding China, it increased by 5.6%. Then there is a clear slowdown, so what do you expect next year's sales to be like?

◇ Kwon Yong-joo: I think the growth rate of electric vehicles will be slightly higher next year than this year.

◆ Cho Tae-hyun: It will be a little better. Compared to this year?

◇ Kwon Yong-joo: Yes, because as you said, the initial concern about excluding China was that the growth rate of electric vehicles will not exceed 5% in 2024 compared to 2023 We talked about that a lot. But anyway, except for China, it has now grown more than 5%.

◆ So you're saying it's not a very bad thing?

◇ Kwon Yong-joo: That's right. So this is what I've been talking about. It's not that electric cars were really cash, but 2021 and 2022 were rather overheated growth. It's becoming more convincing to interpret it like that.

◆ Cho Tae-hyun: It was a very explosive growth at the time.

◇ Kwon Yong-joo: It was an ideal overheating phenomenon.

◆ Cho Tae-hyun: It's rather normalized now?

◇ Kwon Yong-joo: That's right. Because we usually talk about it every year, when we forecast it, it usually predicts growth of about 10-15%. So, 5% growth this year temporarily contracted, but next year, the normal growth rate, or 10-15%, will rise. That's what I'm looking at, and the reason is when automakers started to pour out electric vehicles in earnest. So, before that, if the leading companies took the lead in electric cars because they said they would do it first, but now they can't do the latecomers, so it's next year that they pour out their products. Then, even if you turn your head on the left, you have an electric car, and even if you turn right, you have an electric car, and you have more options. Of course, as it increases, we will have no choice but to pay more attention little by little.

◆ Cho Tae-hyun: Then it will definitely be better than this year. But there's one big variable to expect to get better. Trump is going to cut subsidies for electric vehicles. You're talking about these things, what arguments are you making specifically?

◇ Kwon Yong-joo: They're subsidizing electric cars in the U.S. and they're saying they're going to get rid of them. Elon Musk and Tesla agree on this, and the reason is that another company comes up with an electric vehicle and gets a subsidy, and from the point of view of the pursuit, the subsidy can speed up very much. So Tesla said, 'I don't need a subsidy, I was selling well without it. So let's get rid of it altogether.' Then their market will be mainly formed. That's why the chaser's speed drops sharply. So it's okay to get rid of it.

◆ Cho Tae-hyun: So I'm also in favor of policies that could have a direct impact. So in the end, it can be seen that corporate interests are prioritized over policy aspects, right?

◇ Kwon Yong-joo: If you do that, then other companies don't offer electric cars. In that case, there is a U.S. emission right, so you have to pay the fine. Tesla sells the fine. We usually call it that carbon credit, but in the past Tesla made a lot more profit by selling carbon credits than by selling cars. As of 2023, when it made 1.2 trillion won in profit, it sold cars and lost 400 billion won. But they sold carbon emission rights and recorded a surplus.

◆ Cho Tae-hyun: Oh, yes.

◇ Kwon Yong-joo: Then the latecomers end up having no choice but to buy carbon credits again. I'm looking at that market as well.

◆ Cho Tae-hyun: I think it's much more of an entrepreneurial mindset than a politician, as well as the president-elect and his closest aides. Regardless of Tesla's stock price, it's very high. Last night, the New York stock market was being adjusted, but Tesla rewrote the record of the highest price ever. If you look at this background, there are many reasons, but this part of Tesla's full self-driving seems to have a lot of influence. What do you think about this part?

◇ Kwon Yong-joo: So I look at Tesla's stock price going up like this. When it comes to the product itself, there is not much reason for the stock price to rise. But when I see what this company is going to do in the future, it will be self-driving with FSD as you said a while ago. But what has been the stumbling block so far is that federal authorities in the United States must have both steering wheels and brake pedal accelerators just in case when producing self-driving cars. There is such a rule, but Tesla is saying to get rid of it. I'm going to get rid of it altogether. There are no steering wheels and no pedals. I'm saying let's do that. But since Elon Musk joined the committee to deregulate federal regulations, he can pour it out as much as he wants when he says he doesn't need autonomous cars in the future. So the reason why this is important is that the Tesla is going to be self-driving based on the camera. The camera is cheaper than a rider or radar. As a result, there is no steering wheel, and camera-based autonomous driving can be fully realized. If that happens, we can really put in an autonomous vehicle that Elon Musk talked about and get rid of the bus itself.

◆ Cho Tae-hyun: I'm not sure if social consensus is possible, but I think we need to look at the situation.

◇ Kwon Yong-joo: That's right.

◆ Cho Tae-hyun: But if you look at domestic Tesla owners, I think this is an option to buy a fully autonomous driving function, but I've never used it properly. That's why it seems to be proceeding with the lawsuit. What is it about?

◇ Kwon Yong-joo: So usually, self-driving requires several steps, but so far, consumers have not been able to trust the term FSD, full self-driving. So, there was a story like that in California. Don't use the word "autonomous driving" in that U.S. Use the word "driver assistance."

◆ Cho Tae-hyun: It's actually not a completely self-driving car, right?

◇ Kwon Yong-joo: That's right. That's why I've always used the term FSD as a marketing term. But it's at the level of filing a lawsuit because some consumers say there's a problem, saying, "This doesn't work."

◆ Cho Tae-hyun: In fact, in the United States, because of this problem, there were things like large subsidies.

◇ Kwon Yong-joo: They didn't let us use the word FSD even in the United States. Marketing terms can really cause consumers to be mistaken for full self-driving.

◆ Cho Tae-hyun: So haven't you had a lot of accidents?

◇ Kwon Yong-joo: That's right. So, there are many cases of just driving away from the steering wheel by believing in it, so controversy arises when an accident occurs like that.

◆ Cho Tae-hyun: Okay. Tesla's stock price is still going well, but there seems to be still some anxiety factors. I also thought that it would take a little more time to improve the market. So far, we have talked about various things with Kwon Yong-joo, a professor of automobile transportation design at Kookmin University. Thank you for talking today.

◇ Kwon Yong-joo: Thank you.

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