[Asia Economy Reporter Changhwan Lee] Starting this year, government subsidies for electric vehicles priced over 90 million KRW have been eliminated, intensifying competition in the domestic electric vehicle market, which Tesla had been dominating.
According to industry sources on the 23rd, the Ministry of Economy and Finance, the Ministry of Environment, and the Ministry of Trade, Industry and Energy announced the 2021 subsidy system reform plan on the 21st, which includes these details.
The government announced that it will supply a total of 136,000 vehicles this year, including 121,000 electric vehicles and 15,000 hydrogen vehicles, through subsidies and infrastructure improvements. This represents a 21.4% increase in electric vehicles and a 49.2% increase in hydrogen vehicles compared to the previous year. The support budget will also be increased to 1.023 trillion KRW and 365.5 billion KRW, respectively.
However, support for high-priced electric vehicles over 90 million KRW will be reduced to prevent tax benefits from concentrating on some wealthy individuals and expensive imported cars.
According to the Korea Automobile Manufacturers Association, Tesla is estimated to have received nearly half of the 90 billion KRW in electric passenger car subsidies paid in the first half of last year. As a result, subsidies for Tesla Model S, Jaguar Land Rover I-PACE, Mercedes-Benz Korea's EQC 400, and Audi Volkswagen Korea's e-tron 55 quattro will be excluded.
Electric vehicles priced under 90 million KRW will continue to receive subsidies. However, vehicles priced under 60 million KRW will receive full subsidies, while those priced between 60 million and 90 million KRW will receive only 50%. The Model 3, the best-selling electric vehicle domestically last year, was allocated subsidies ranging from 3.29 million to 6.84 million KRW.
Among passenger cars, the Kona (PTC·HP) and Niro (HP) receive the highest national subsidies of 8 million KRW. When combined with local government subsidies, electric passenger cars can receive up to 19 million KRW in support. The hydrogen vehicle Nexo receives a national subsidy of 22.5 million KRW, which can increase up to 37.5 million KRW including local subsidies.
According to the reform plan, domestic electric vehicles such as those from Hyundai Motor Company will relatively benefit more from subsidies, making them more advantageous in future sales and market share compared to mostly high-priced imported electric vehicles. This year’s electric vehicle market is expected to see fierce competition with the launch of various new models.
Tesla plans to release the Model Y, a compact sport utility vehicle (SUV), this year. The Model Y has been a popular model, selling over 70,000 units since its launch in the U.S. early last year. Hyundai Motor Group plans to consecutively launch new vehicles based on the dedicated E-GMP platform, including the Ioniq 5, for which teaser images were recently released, as well as the Kia CV (project name) and Genesis JW (project name).
Meanwhile, support for commercial vehicles such as taxis, buses, and trucks will also be restructured. This year, 1,000 electric buses, 25,000 electric trucks, and 180 hydrogen buses will be supplied. To rationalize market prices, a minimum purchaser co-payment will be set at 100 million KRW for large electric buses, 750,000 KRW for small electric two-wheelers, 1.15 million KRW for medium-sized, and 1.3 million KRW for large and other types.
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