Automobile Industry Association: "Hybrid Vehicle Benefits Must Continue to Address Carbon Neutrality and Industrial Shocks"

"Hybrid Cars, Potential Bridge Role in Transition from Internal Combustion to Electric Vehicles"

[Asia Economy Reporter Yu Je-hoon] To prepare for carbon neutrality, fine dust reduction, and industrial shocks due to electrification, there is a call to continue and expand tax benefits for hybrid vehicles.

The Korea Automobile Manufacturers Association (KAMA) stated on the 3rd in its report titled "The Necessity of Hybrid Vehicle Distribution and Policy Tasks" that "Hybrid vehicles are a realistic alternative for industrial shocks during the transition to electric vehicles, as well as for carbon neutrality and fine dust reduction policies."

According to the report, government support for hybrid vehicles has been decreasing by 500,000 KRW annually, from a total of 3.83 million KRW in 2017 to 1.83 million KRW this year.

Despite the reduction in subsidies, hybrid vehicles have recently shown remarkable growth. This appears to be largely due to the perception that hybrid vehicles are economical the more they are driven, thanks to their high fuel efficiency. For example, in the case of recreational vehicles (RVs), the share of diesel vehicles decreased from 50.1% in 2019 to 41.2% last year, while the share of hybrid vehicles increased from 3.9% to 8.1%.

KAMA commented, "The high growth of hybrid vehicles despite subsidy reductions is largely due to the perception that they are economical the more they are driven because of their high fuel efficiency," adding, "However, without tax support, the appeal of hybrid vehicles to consumers is bound to be significantly diminished."

Hybrid vehicles were also identified as a realistic alternative in current carbon neutrality and fine dust reduction policies. From a vehicle life cycle assessment (LCA) perspective, hybrid vehicles emit 27.5 tons of CO2-eq greenhouse gases, whereas 80 kWh electric vehicles emit up to 28.2 tons of CO2-eq depending on battery manufacturing and recycling methods.

KAMA stated, "While the eco-friendliness of electric vehicles may improve depending on the energy generation mix, there are limits to making revolutionary improvements by 2030," and added, "Hybrid vehicles can contribute to achieving carbon neutrality more cost-effectively than electric vehicles in the medium to short term."

In particular, hybrid vehicles serve as a bridge between internal combustion engine vehicles and electric vehicles by using key electric powertrain components (battery, motor, inverter, converter, etc.) together, minimizing the burden on the automotive industry ecosystem, including small and medium parts suppliers, during the transition to electric vehicles.

Jung Man-ki, Chairman of KAMA, emphasized, "Domestic internal combustion engine parts manufacturers should be able to use hybrid vehicles as a 'cash cow' to invest in electric vehicles in the future," and added, "Especially, as of last year, the share of domestic cars in the electric vehicle market was 65%, while the share of domestic cars among hybrid vehicles meeting tax reduction requirements reached 87%, so support measures for hybrid vehicles are essential from the perspective of fostering the domestic automotive industry."