A recent report showed that Germany, the largest European automotive market, is expected to see a drop in electric vehicle sales this year for the first time in seven years, piling pressure on Korean battery makers who have operated core businesses in the all-important region.

From January to November, the number of EVs sold in Germany decreased 5 percent on-year to 627,000 units, according to a report from Eugene Investment & Securities. In November alone, the country witnessed a 39 percent drop in sales to 63,000 units.

The company projected the numbers to dip in December as well, bringing this year’s EV sales down by 10 percent from a year earlier. It would be the first case of a sales drop in the country since 2016.

Up until last year, the number of newly registered electric cars in Germany surged 30.1 on-year percent to 470,000 units, data from Kraftfahrt-Bundesamt showed.

Industry sources say Germany’s EV subsidy cut, coupled with an economic recession, has made customers reluctant to purchase battery-powered cars.

In January, the government reduced its EV tax credit from 6,000 euros ($6,400) to 4,500 euros for electric cars priced less than 40,000 euros. It suspended tax breaks for those buying plug-in hybrid cars running on gasoline engines along with electronic motors.

The report said the electric car sales slump in Germany, which took up 32 percent market share in Europe last year, is a signal that shows the whole region is beginning to see a slowdown in EV demand.

Korean battery makers like LG Energy Solution, Samsung SDI and SK On, who either operate or are setting up production bases in Poland and Hungary, are facing a gloomy outlook for the second-largest EV market following the US.

The companies have already vowed to adjust their production volume from local battery manufacturing plants to reduce inventory burdens due to the creeping presence of cheaper China-made batteries.

Led by the world's No. 1 battery manufacturer CATL, Chinese companies have expanded their share of the European market from 6.7 percent in 2021 to 40.1 percent in the January-July period this year, according to market tracker SNE Research.

The Korean trio, however, lost their shares from a combined 70.6 percent to 57 percent in the same period.

Experts say Korean battery firms may take a further hit in Europe next year depending on the results of the European Union's parliamentary elections.

In June next year, Europeans from 27 nations will elect a new EU parliament in charge of the region’s energy and climate policy. Many EU member states will also hold parliamentary and presidential elections in 2024.

“If the winners are far-right populists, the automotive industry is likely to take a slower transition to electrification, posing another setback for EV battery manufacturers,” said Kim Pil-su, a car engineering professor at Daelim University.