The government plans to overhaul its entire electric vehicle (EV) purchase subsidy system. The move comes as a growing number of local governments run out of subsidy funds amid rising EV sales.
According to the Ministry of Climate, Energy and Environment on the 7th, the ministry will soon commission a research study reviewing the overall EV subsidy system and hold a forum to gather expert opinions. At the forum, the ministry plans to examine whether it is appropriate that local government subsidies are set at "30 percent or more of the national subsidy."
EV purchase subsidies are divided into national subsidies and local subsidies. Under the EV distribution project guidelines, local governments must allocate budgets so that local subsidies are paid at a minimum of 30 percent of the national subsidy.
Is the 'Chasm' Over? What Happened as EVs Sold Well
This year, as oil prices surged amid the war between the United States and Iran, EVs proved so popular that some local governments exhausted their subsidy funds. According to the Korea Automobile & Mobility Association (KAMA), 198,509 new EVs were registered in the first half of this year, up 113.6 percent from the first half of last year. EVs accounted for 23.3 percent of the 850,636 new vehicles registered in the first half. Some in the market have even interpreted this as a sign that the EV chasm (a temporary stall in demand) that had persisted for some time is coming to an end.
As EVs grow more popular, the ministry is reportedly planning to increase the volume of subsidy support next year, but this would inevitably increase the financial burden on local governments.
The ministry also plans to examine whether the current subsidy amounts are appropriate for each EV model. In particular, it will conduct work to calculate appropriate subsidy amounts in line with the situation where large electric cargo trucks are receiving ministry certification and preparing for launch.
"Considering costs and other factors, we will review how much subsidy should be provided (to large electric cargo trucks) so they can gain competitiveness against internal combustion engine vehicles and form a market," a ministry official explained.
Cases Where Companies Provide Their Own Support
Amid this situation, cases are emerging where automakers provide their own support in place of the government. According to the auto industry, Tesla Korea is operating a "Tesla Support Program" targeting residents in areas where local government EV subsidies have been depleted and no supplementary budget is planned. For those who take delivery of eligible vehicles by September 30, Tesla directly discounts the amount equivalent to the national subsidy for each model.
Chinese EV maker BYD, which was excluded from the government's national EV subsidy program, has also played its "own subsidy support" card. BYD Korea ran an "Environmental Zero-Emission Vehicle Customer Support Program" for the month of July, providing the same amount as the existing national subsidy on its own.
