Global EV makers launch affordable EVs for subsidies offered by Korea

Tesla Inc.’s Model Y. [Courtesy of Tesla]

South Korea has seen rising competition among foreign automakers to lower the prices of their electric vehicles (EVs) amid a rapid shift toward electrification.

Global car makers used to introduce EV lineups in South Korea that were relatively expensive and fell outside the range of domestic subsidies. However, a notable shift has occurred, as they have started unveiling new EV models with lower price tags and enhanced performance. As a result, there is now an increased likelihood of the EVs being eligible for subsidies of up to 100 percent.

According to multiple sources from the automobile industry on Monday, the shift has been triggered by the launch of the Model Y RWD by U.S. electric vehicle (EV) manufacturer Tesla Inc.

In the past, Tesla’s Model Y FWD was manufactured in the U.S. and sold for more than 70 million won ($54,867) per unit in South Korea. For its RWD model, however, the U.S. carmaker used lithium-iron-phosphate (LFP) batteries made in China to lower the price to 56.9 million won per unit, making the model eligible for the full subsidiary range.

South Korea is providing 100 percent subsidies for EVs priced below 57 million won, and 50 percent subsidies for EVs falling within the price range of 57 million to 85 million won this year.

The popularity of EVs with lower price tags is soaring in South Korea despite the drawback that the driving range at a single charge is reduced to only 350 kilometers.

In June, Volkswagen Korea introduced its inaugural EV, the ID.4, featuring a new Pro Lite model. The model comes with a reduced price that falls below the threshold for eligibility to receive 100 percent subsidies.

Other imported brands that previously failed to meet specific requirements, such as cold-weather driving range, have joined in introducing new models with better performance, increasing their likelihood of becoming eligible for subsidies.

A notable example is Q4 e-Tron 40 by Audi, which failed to meet subsidiary requirements last year. The latest model for this year boasts an impressive 411-kilometer range on a single charge and an impressive 268-kilometer range in cold weather conditions, making it eligible to receive the subsidy.

To be eligible for subsidies, the Ministry of Environment has mandated a specific requirement for EVs with a total range of 400 kilometers or more. They must have a low-temperature range of at least 65 percent of their normal temperature range.

“The auto industry is expected to see an intensifying competition among carmakers, especially imported brands, as they rush to lower prices or introduce new models eligible for the state subsidies,” said an unnamed source from the industry.