EVs to return 20% of subsidies if exported overseas ahead of driving period

[Image source: Gettyimagesbank]

The South Korean government is planning to extend the required driving period for subsidized electric vehicles (EVs) to eight years, with 20 percent of the subsidy to be returned for EVs exported overseas before the period ends. The measure comes to prevent the leakage of waste batteries outside Korea, particularly as their national importance grows amid the fierce global competition for batteries.

According to the government on Wednesday, the Ministry of Environment has published the amendment to the Enforcement Rules of the Clean Air Conservation Act with these changes in advance and is collecting public opinions. Once the advanced publication period and review ends, the bill is expected to take effect as early as 2024.

A key change in the amendment is the expansion of the mandatory operation period for government subsidized EVs to eight years from the current five years. The rules originally required subsidies to be returned only if the vehicle is exported overseas in less than five years of purchase, but under the amendment, 20 percent of the subsidy will have to be returned if the vehicle is exported between five and eight years of purchase.

But the new rule will not apply if the EV is sold in the domestic second-hand market, and purchasing a used EV will also allow buyers to inherit the driving period requirement. This means used car companies, not individual owners, will mostly be subject to the return of subsidies.

The list of applicable vehicles will also be expanded significantly. Previously, the mandatory driving period rule was applied only to vehicles that applied for EV subsidies after July 2022, but the new rule will apply to all EVs that have applied for deregistration for export purposes. For example, EVs purchased with subsidies in 2016 will also be required to return part of the money received before they are exported.

The Ministry of Environment underscores the need to improve air quality and further reduce greenhouse gas emissions by tightening restrictions on EV exports overseas. “We provide subsidies for EV purchases to realize carbon neutrality by improving air quality,” an official from the ministry said. “We need more EVs in Korea to contribute to carbon neutrality.”

The amendment also aims to prevent waste batteries from being shipped overseas. Waste batteries are becoming increasingly valuable as the price of raw metals rises and the recycling market expands. The European Union (EU) has begun to treat them as key national resources, mulling regulations to restrict exports out of its member countries. In response, Korea’s Environment Ministry is taking a similar route as voices in the country clamor for the need of a system to prevent waste batteries from being shipped overseas via EV exports.

The number of used EVs exported every year in Korea is also growing, with 387 EVs deregistered for export in 2018, but the number doubling every year to 680 in 2019, 1,304 in 2020, 3,497 in 2021 and 5,110 in 2022, according to the Ministry of Land, Infrastructure, and Transport.

“It’s no secret that waste batteries are being leaked overseas,” Kim Hee-young, a research fellow at the Korea International Trade Association, said. “A system should be created to collect waste batteries so that they can be reused domestically first and recycled further afterwards.”

The ministry will also offer incentives to producers to boost the domestic circulation of waste batteries. It plans to create an additional factor for the recycling value of EV batteries to the criteria for funding low-emission vehicles such as EVs to provide higher subsidies to vehicles with batteries that have greater potential for recycling.

“Recycling EV batteries are becoming increasingly important as they contain large content of valuable metals such as nickel and cobalt,” the ministry said. “We need differentiated funding for low-emission cars that takes this into account.”