The South Korean government has decided to temporarily increase subsidies for electric vehicles (EVs). (Image courtesy of Yonhap News)
SEOUL, Sept. 26 (Korea Bizwire) – The South Korean government has decided to temporarily increase subsidies for electric vehicles (EVs). The government will provide additional subsidies in proportion to the discount offered by EV makers. If EV makers offer a 5 million won discount, the government will provide an additional subsidy of up to 1 million won.
This decision comes in response to sluggish EV sales, challenging the government’s EV support plan. However, there are opposing voices asserting that using taxes to support specific companies, including Chinese battery makers, is not appropriate.
According to the automobile industry, first-half EV sales reached 78,977 units, up 16 percent year on year. Despite the overall growth in sales, the growth rate sharply declined compared to the first half of last year, which witnessed a growth rate of 70 percent.
The share of EVs in domestic sales of eco-friendly vehicles was 33 percent in the first half of this year, down 9.7 percentage points from 42.7 percent a year ago.
To counter the accumulation of EV inventories, EV makers launched a discount campaign. Hyundai Motor, for instance, reduced the price of its Ioniq 5 and Ioniq 6 models produced before April 2023 by 3 million won, and Kona Electric models produced from May to July by 1 million won. Kia will offer a discount of 2 million won for its EV6 and EV6 GT models produced in March and a 7 percent discount for Niro EVs also produced in March.
The government’s proposal to boost EV subsidies, however, has faced criticism, with some suggesting that the plan uses taxpayer money to support specific companies like Hyundai and Kia. These carmakers dominate domestic passenger EV sales, accounting for a share of more than 80 percent. In the first half of this year, they had a combined share of 82.6 percent in the domestic EV market, up 3.1 percentage points from 79.5 percent a year ago.
Another criticism is that the plan would benefit Chinese-made battery makers, as a significant number of EVs released this year and last year are equipped with Chinese-made batteries.
Kevin Lee (kevinlee@koreabizwire.com)
