Concerns rise as LPG Truck purchase subsidies set to end this year

Kia Bongo3 model [Courtesy of Kia]

Concerns are rising among small business owners in South Korea as the government is set to terminate the purchase subsidies for liquefied petroleum gas (LPG) cargo vehicles at the end of this year.

The government has banned new registrations of diesel-fueled 1-ton trucks from next year and Hyundai Motor Co. and Kia Corp. have decided to discontinue the production of such vehicles and instead launch new LPG trucks next month.

According to industry sources on Monday, Hyundai Motor and Kia plan to mass-produce trucks equipped with a significantly enhanced 2.5L LPG direct-injection turbo engine (T-LPDi) starting next month. This engine will be applied to Hyundai Porter and Kia Bongo3 models.

Starting from January 1 next year, the Special Act on Air Quality Improvement for Atmospheric Control Area dictates a ban on new registrations of diesel vehicles for small delivery trucks and children’s school buses.

Instead, environmentally-friendly vehicles such as electric and LPG vehicles are permitted. LPG vehicles have garnered attention as eco-friendly cargo vehicles, emitting almost negligible fine dust and only 1/93rd of nitrogen oxide (NOx) emissions compared to diesel trucks.

However, the current subsidy policy for LPG cargo vehicles is set to expire at the end of this year. The government has been supporting the transition from diesel trucks to LPG cargo vehicles by providing subsidies.

Starting at 4 million won ($3,000) in 2019, the subsidy amount gradually decreased to 2 million won last year and 1 million won this year, with plans to terminate at the end of this year.

Small business owners and the cargo vehicle industry submitted a proposal requesting an extension of the LPG cargo vehicle subsidy program.

In a proposal sent to the Ministry of Economy and Finance and the Ministry of Environment last month, the Small Business Association urged for the continuation of LPG cargo vehicle support until 2025, with an increase in subsidies back to the initial 4 million won.

The LPG cargo vehicle program is unique among cargo vehicle support programs as it provides subsidies based on the premise of scrapping diesel vehicles.

Concerns have been raised that the discontinuation of this program could slow down the conversion of cargo vehicles to environmentally friendly fuels. There is also a significant possibility of a price increase of around 2 million won for new LPG 1-ton trucks.

“Eliminating subsidies for LPG cargo vehicles may inevitably lead to an increase in drivers opting for used diesel cargo vehicles,” said an official from the association.