[Electric Vehicle Subsidies, Is This Okay?] "Handout Method Is Haphazard, Needs Overhaul Now"

Korea's Annual Planning Makes Prediction Difficult
Funds Remain Unused Despite Surplus
China and US Boost Domestic Industries
Inflation Reduction Act Requires Major Revision

American electric vehicle startup Rivian's R1T electric pickup truck

[Asia Economy Reporter Choi Dae-yeol] "It is clear that it helped create a market that did not exist before. However, since it is an artificial stimulant, if it suddenly disappears, I believe the side effects will not be insignificant."

This is the opinion of an official from the completed car industry regarding electric vehicle purchase subsidies. When the U.S. Inflation Reduction Act (IRA), which provides subsidies only for electric vehicles produced domestically, goes into full effect next year, controversies surrounding electric vehicle subsidies are expected to intensify. ▷Related article on page 6

The electric vehicle subsidy system was established with the intention of addressing environmental issues such as climate change and fostering the industry. A considerable budget has been allocated and steadily increased every year. In Korea, there have been continuous criticisms that the subsidy system was established without clear principles or standards, making its objectives unclear and even failing to achieve its intended effects.

Hyundai Motor Ulsan Plant Export Shipping Dock

Son Dong-hee and Kim Tae-eun, budget analysts at the National Assembly Budget Office, recently concluded in their analysis report on eco-friendly vehicle support projects that Korea’s current electric vehicle subsidy system lacks a mid- to long-term plan and is not systematic, thus requiring an overall reform of the system. Because subsidy plans are made on a yearly basis, predictability is low, and there is a concern that local government funds may be insufficient, potentially leading to unused national funds.

For electric vehicles with large-capacity batteries that sell well in the market, there is also analysis that greenhouse gas emissions throughout the entire process?including vehicle production, disposal, and fuel procurement?are higher compared to hybrid vehicles. Countries with large electric vehicle markets such as China and the U.S. openly use subsidy systems to nurture their domestic electric vehicle industries.

In light of the Inflation Reduction Act, there are calls to revisit the subsidy system itself, including whether the electric vehicle purchase subsidy system is being properly operated and, if not, how it should be revised.