"South Korea's Electric Vehicle Subsidy Operation Plan Should Be Reexamined to Align with Major Countries' Trends"

[Asia Economy Reporter Ki-min Lee] There have been calls for the government to reconsider South Korea's electric vehicle (EV) purchase subsidy operation plan to align with trends in major countries.

On the 26th, the Korea Automotive Technology Institute stated in a report titled "Trends and Implications of EV Purchase Subsidies in Major Countries" that changes are needed in South Korea's EV subsidy payment methods. EV purchase subsidies are policy tools to promote the spread of eco-friendly vehicles in line with environmental regulations.

In South Korea, the plan is to reduce the subsidy amount per vehicle while increasing the number of eligible vehicles. For passenger EVs, the maximum subsidy was 8.2 million KRW last year but was reduced to 8 million KRW this year. Local government subsidies (ranging from 4 million to 10 million KRW) are also paid differentially in proportion to the national subsidy. Meanwhile, the EV subsidy budget increased by 23% from the previous year to about 1 trillion KRW (525 billion KRW for passenger vehicles), and the target for passenger and cargo EV distribution was expanded to 100,000 units from 78,000 units last year.

In comparison, Germany revised its policy twice to promote the popularization of eco-friendly vehicles, providing subsidies of 9,000 euros (about 12.12 million KRW) for EVs priced below 40,000 euros (about 53.87 million KRW) and 7,500 euros (about 10.1 million KRW) for those priced between 40,000 and 65,000 euros (about 87.54 million KRW). This represents roughly double the subsidy amount compared to the previous policy.

Japan, which provides subsidies proportional to driving range, is also considering increasing the subsidy amount per vehicle. The existing EV subsidy is calculated at 1,000 yen (about 10,360 KRW) per kilometer of driving range, with the government paying up to 400,000 yen (about 4.14 million KRW) and local governments up to 300,000 yen (about 3.1 million KRW). However, recently, if households or companies have renewable energy facilities such as solar power, the government is considering raising the subsidy to a maximum of 800,000 yen (8.28 million KRW) and local governments to 400,000 yen (4.14 million KRW).

In China, subsidies are provided mainly to technologically advanced companies by comprehensively considering vehicle price, driving range, battery mass, and energy density (Wh/kg), and the subsidy period has been extended until next year. In the United States, federal tax credits provide up to $7,500 (about 8.38 million KRW), and state governments provide subsidies ranging from $500 to $7,000 (about 560,000 to 7.82 million KRW). Notably, subsidies are not given to companies whose cumulative domestic EV sales exceed 200,000 units, preventing concentration on specific automakers.

The Korea Automotive Technology Institute explained that while South Korea's EV purchase subsidies are competitive compared to major countries, the subsidy amount operation plan and payment methods need to be changed like the models of major countries. They emphasized the need to operate subsidies flexibly by referring to cases such as increasing subsidy amounts like Germany and Japan or extending the subsidy period like China. In particular, they stressed the need to rationalize the system by reviewing the dual subsidy payment system between national and local governments to ensure that the possibility of receiving subsidies does not vary depending on residence or application timing.