South Korea has introduced a revised subsidy scheme for electric buses in 2025. (Image courtesy of Yonhap)
SEOUL, Jan. 3 (Korea Bizwire) — South Korea has introduced a revised subsidy scheme for electric buses in 2025, offering additional financial incentives to manufacturers of hydrogen and school buses while implementing stricter criteria to prioritize safety and transparency.
The move is seen as a response to concerns over the growing presence of Chinese-made electric buses in the domestic market and aims to support local manufacturers.
Key Changes to Subsidy Structure
The revised guidelines, announced by the Ministry of Environment on January 2, introduce a new infrastructure subsidy of up to 7 million KRW, favoring manufacturers that have supplied at least 20 hydrogen or school buses in the past year.
Hyundai Motor Company and select domestic manufacturers are expected to benefit from this provision, given their strong market presence in these categories.
The maximum subsidy for large electric buses is capped at 70 million KRW, while medium-sized buses can receive up to 50 million KRW. For school buses, the limits increase to 115 million KRW and 100 million KRW for large and medium models, respectively, reflecting the government’s push to phase out diesel-powered school transportation.
Stricter Performance and Safety Criteria
To ensure safety and encourage technological advancement, the performance-based subsidy has become more stringent:
- Range Requirements: Large buses with a single-charge range below 500 kilometers will face deductions of 500,000–840,000 KRW for every 10 kilometers under the threshold.
- Battery Safety: A battery safety subsidy of 10 million KRW is available, provided vehicles pass stricter tests, including a battery management system capable of detecting abnormalities during parking.
The battery efficiency multiplier, introduced in previous years, continues to favor domestic nickel-cobalt-manganese (NCM) batteries over lithium-iron-phosphate (LFP) batteries, commonly used in Chinese buses.
Measures to Improve Transparency
To address concerns over opaque practices by some importers, including alleged backdoor deals, the government has introduced a two-year subsidy restriction for buyers with financial ties to manufacturers. Additionally, manufacturers must join product liability insurance programs and share state-of-charge (SoC) battery data, with a grace period of six to 12 months.
Electric Trucks and Commercial Vehicles
The new subsidy system also extends to electric freight vehicles, with small trucks eligible for up to 10.5 million KRW and compact models for 7.7 million KRW. Ultra-compact trucks receive a flat-rate subsidy of 3.8 million KRW. Additional incentives are available for fast charging capabilities and extended range, as well as discounts for farmers and buyers benefiting from manufacturer price cuts.
A Shift Toward Domestic Prioritization
The revised policies align with South Korea’s broader goal of bolstering its domestic electric vehicle industry. In 2024, Chinese buses accounted for over 40% of the market, prompting concerns about foreign dominance.
By tying subsidies to performance, safety, and local contributions, the government seeks to give domestic manufacturers a competitive edge while ensuring high-quality standards for electric vehicles.
This comprehensive overhaul reflects South Korea’s commitment to sustainable transportation, balancing market competition with support for homegrown innovation.
Ashley Song (ashley@koreabizwire.com)
