Hyundai Motor Co. and its sister concern, Kia Corp., plan to cut the prices of some of their electric vehicles (EVs) in response to the South Korean government's decision to extend subsidies for EVs. The move comes as a response to slow demand for EVs in South Korea due to slow economic growth.

Hyundai will cut the prices of EVs like the Ioniq 5, Ioniq 6 and Kona EV, while Kia will do the same for models like the EV6, Niro EV and Niro Plus. The discount will be available till 2023, as automakers aim to take advantage of the government's temporary subsidy extension.

The price cuts by Hyundai and Kia could intensify the ongoing price war in South Korea's automotive market, which is already dominated by these two companies. Lee Hang-ku, head of the Jeonbuk Institute of Automotive Convergence Technology, believes the move could increase competition next year, especially as foreign carmakers introduce new models.

Tesla, a leading EV manufacturer, introduced its China-made Model Y electric SUV in South Korea in July, priced at $44,000.

This decline in EV prices may also contribute to global tensions related to EV pricing. The initiative will result in significant price disparity, making certain cars in South Korea up to one-third cheaper than in other countries. For example, Hyundai's Ioniq 5 will cost 46 million won ($34,100), which represents an 8% or 4 million won discount from its base price. When factoring in local subsidies, Seoul residents will be able to buy it for less than about 40 million won.

In comparison, the same vehicle starts at £43,445 ($53,000) in the UK and $41,450 in the US, excluding subsidies.

The Environment Ministry reported a drop in EV sales in Korea from 71,744 to 67,654 in the first eight months of the year, which played a role in the government's decision to increase subsidies. Despite budgeting for subsidies for 13,688 EVs in 2023, the Seoul city government has covered only 5,522 vehicles so far, according to official data.