The South Korean government has announced significant reductions in subsidies for Tesla’s “budget” electric vehicle, the Model Y RWD, which is equipped with lithium iron phosphate (LFP) batteries from China. (Image courtesy of Yonhap)
SEOUL, Feb. 21 (Korea Bizwire) – The South Korean government has announced significant reductions in subsidies for Tesla’s “budget” electric vehicle, the Model Y RWD, which is equipped with lithium iron phosphate (LFP) batteries from China.
According to the Ministry of Environment’s finalized guidelines for electric vehicle subsidies released on February 20, the subsidy for the Tesla Model Y RWD this year is set at 1.95 million won, a 62.1% decrease from last year’s 5.14 million won.
Electric vehicle subsidies in South Korea consist of both national and local government contributions. With local subsidies generally proportional to national subsidies, a similar reduction rate is expected.
Despite Tesla’s recent price adjustment, lowering the Model Y RWD’s base price to 54.99 million won to qualify for full subsidies, the substantial cut in subsidies means that the effective price for consumers has actually increased.
The reduction in subsidies for the Model Y RWD is attributed to the Ministry of Environment’s overhaul of the subsidy system, which now penalizes vehicles with LFP batteries due to their relatively lower recycling value. Additionally, Tesla’s lack of a service center in the Gangwon region contributed to the subsidy reduction.
Moreover, Tesla’s price reduction for the Model Y RWD will not qualify for additional subsidies aimed at price discounts. The government determined that Tesla’s price cut was merely an attempt to ensure full subsidy eligibility, thus excluding it from receiving extra support.
KG Mobility’s Torres EVX 2WD has also seen a subsidy reduction of around 30% from last year, due to the new considerations for battery recycling value in the subsidy calculations.
Hyundai’s Ioniq 6 continues to receive the highest subsidy amount at 6.9 million won for its Long Range 2WD and AWD models, maintaining its position despite a slight decrease from last year’s 7.6 million won, which included a discount-related subsidy.
Kevin Lee (kevinlee@koreabizwire.com)
