Seoul under pressure to favor local EVs in subsidizing in line with global trend

[Photo by MK DB]

The South Korean government has come under pressure to revise subsidy system for electric vehicles in line with the domestic-favoring terms in the United States, China, and others.

Most governments offer some form of subsidies either through tax credits or subsidy in purchase of new EVs to promote green vehicles as EVs cost are bulkier than conventional cars due to battery cost. But major economies have changed terms in favor of local brands amid rising EV demand.

Under the new Inflation Reduction Act (IRA), maximum $7,500 tax credit for new EV purchase is restricted to cars assembled with parts sourced from the United States.

In Japan, cars available for external power supply in case of emergency are subsidized by 200,000 Japanese yen ($1,461.07). The feature is a must in Japanese brands, which put them in advantage against imports, according to the Korea Automotive Technology Institute (KATECH).

Italy plans to adjust state subsidies, timed with release of domestic EV brands.

France grants additional subsidies on EVs with a price tag of 45,000 euros ($44,761.64) or below to favor French makers whose mainstay are compact EVs. In Germany, only plug-in hybrids are eligible for government support.

Foreign-made vehicles receive virtually zero favor in China. As cars featuring swappable batteries are subsidized regardless of the price, Chinese brands all turn out EVs with such batteries. Others without the system must be priced at 300,000 Chinese yuan ($43,644.49) or below in order to receive state incentives.

In Korea, subsidies are granted based on the price and maximum drive range of EVs, regardless of the country of origin. After the government excluded plug-in hybrids in subsidization on local brands as well last year, Korea must export plug-in hybrid models due to little demand at home.

“Although government cannot outright stop offering incentives to U.S. EVs, the government should discriminate subsidy for electric buses and hybrid buses as cheap Chinese imports have come to dominate the market based on the subsidy program,” said Jung Man-ki, chairman of the Korea Automobile Manufacturers Association (KAMA).

“Nearly half of electric buses riding on Korean roads are of Chinese brands and thus, 48 percent of all state subsidies went to Chinese electric buses,” Jung argued. “As Korea-made EVs receive no subsidy in China, the government has to consider a change in the subsidy policy to stop offering incentives to China-made EVs at least in the commercial vehicle segment.”

On top of the incentive policy, the government has to tackle many other problems to avoid confusion in the automotive industry, experts say. Each department uses different terms for policies and standardization, such as low emission cars, eco-friendly cars and zero-emission cars.

The Ministry of Environment has not determined whether to revise the state’s subsidy policy for EVs. But it has been in discussion with the local automotive industry to study whether to reflect the after-service system of each EV brand in deciding subsidies.

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