South Korean Government Increases Subsidies for Electric Vehicles

The South Korean government has announced its decision to temporarily increase subsidies for electric vehicles (EVs) in an effort to boost sales. Under the new scheme, the government will provide additional subsidies in proportion to the discounts offered by EV manufacturers.

To incentivize EV sales, if manufacturers offer a discount of 5 million won, the government will provide an additional subsidy of up to 1 million won. This measure is a response to the sluggish sales of EVs in the country, which poses a challenge to the government’s support plan for these vehicles.

Although EV sales witnessed overall growth in the first half of this year, there has been a significant decline in the growth rate compared to the same period of the previous year. EV sales in the first half of this year reached 78,977 units, representing a 16 percent year-on-year increase. However, this growth rate is considerably lower compared to the 70 percent growth rate witnessed in the first half of last year.

The share of EVs in domestic sales of eco-friendly vehicles has also seen a decline. In the first half of this year, EVs accounted for 33 percent of the market, which is a 9.7 percentage point decrease compared to the previous year’s 42.7 percent share.

To address the accumulation of EV inventories, manufacturers have launched discount campaigns. For example, Hyundai Motor reduced the prices of its Ioniq 5 and Ioniq 6 models by 3 million won and its Kona Electric models by 1 million won. Similarly, Kia offered a discount of 2 million won for its EV6 and EV6 GT models, as well as a 7 percent discount for Niro EVs.

However, the government’s proposal to increase subsidies has faced criticism. Some argue that using taxpayer money to support specific companies, particularly Hyundai and Kia, is inappropriate. These two manufacturers dominate the domestic passenger EV market, accounting for over 80 percent of sales. Additionally, there are concerns that the plan would benefit Chinese battery makers, as a significant number of EVs released in recent years are equipped with Chinese-made batteries.

In conclusion, the South Korean government’s decision to temporarily increase subsidies for EVs aims to stimulate sales and address the declining growth rate. However, criticisms have been raised regarding the use of taxpayer money and potential benefits for specific companies and foreign battery makers.

– Yonhap News