3 Il Han Hwajin Environment Minister Press Briefing
"Battery Safety Subsidy Reform to Be Considered"
The Ministry of Environment is considering a plan to further differentiate subsidies based on the safety of electric vehicles (EVs). This comes as EV fire accidents continue unabated, and recently, a fire incident occurred at a lithium battery factory in Hwaseong, spreading anxiety and negative perceptions about EVs.
Minister of Environment: “Considering Reform of Battery Safety Subsidies”
On the 3rd, Han Hwa-jin, Minister of Environment, met with reporters at the Government Complex Sejong and said, “We will comprehensively review EV subsidies in relation to the recent battery fire incident,” adding, “We previously reformed subsidies considering the safety of EV batteries, and we will look into this aspect again this year.” This is interpreted as an intention to strengthen the safety clause, one of the subsidy conditions, to promote the distribution of safe EVs.
Currently, EV subsidies provide up to 6.5 million KRW for vehicles priced below 55 million KRW. In February, the Ministry of Environment announced a subsidy reform plan that included a safety subsidy of 200,000 KRW for vehicles equipped with an On-Board Diagnostics (OBD) system. OBD allows drivers to detect malfunctions, effectively enhancing safety, but since there is no mandatory regulation for installation, the subsidy serves as an inducement. For electric buses, the battery safety subsidy was significantly increased from 3 million KRW to 10 million KRW, and the eligibility criteria were strengthened.
Nevertheless, EV accidents are increasing. According to the Fire Agency, property damage caused by EV fires last year amounted to 1.46398 billion KRW. In 2019, the damage was only 270.02 million KRW, but it sharply increased to 360.74 million KRW in 2020, 878.08 million KRW in 2021, and 913.36 million KRW in 2022. The number of fire incidents reached 72 last year, 24 times more than five years ago. Although there were no fatalities, injuries have occurred annually.
On the 25th of last month, firefighters are searching for missing persons at the scene of a fire at a primary battery manufacturing factory in Hwaseong-si, Gyeonggi-do. Photo by Jinhyung Kang aymsdream@
In particular, anxiety about EVs has grown since a fire broke out on the 24th of last month at Arisel, a primary battery manufacturing plant in Hwaseong, Gyeonggi Province. This factory handles lithium batteries, which are a representative risk factor for EV fires. Among EV buyers, concerns about fires have increased, and a so-called ‘Battery Phobia’ is spreading, with fears even extending to EV charging stations installed in apartment complexes.
Preventing Battery Phobia from Hurting EV Sales... Initiating Accident Prevention Measures
Excessive anxiety about batteries is also disrupting EV sales. According to the Korea Automobile Mobility Industry Association (KAMA), EVs accounted for 7.77% of the domestic passenger car market last year, showing a slowdown from 8.71% the previous year. EV sales from January to April this year were 36,273 units, a 28.1% decrease from 50,483 units in the same period last year. Continued safety controversies could make it difficult to achieve the government’s policy goal of expanding EV distribution.
However, even if safety subsidies increase, it is unlikely that the total subsidies will increase. The Ministry of Economy and Finance has stated its position to continuously optimize zero-emission vehicle subsidies. This year, the budget for zero-emission vehicle distribution projects, including EVs, is 2.3193 trillion KRW, down 9.6% from 2.5652 trillion KRW last year. Since the Ministry of Environment plans to lower the EV subsidy eligibility price from the current 55 million KRW to 53 million KRW next year, the budget is also likely to decrease accordingly.
Han Hwa-jin, Minister of Environment, speaking to reporters at the Sejong Government Complex on the 3rd. Photo by Ministry of Environment
Specific plans for EV subsidy payments are expected to be announced as early as the beginning of next year. Lee Young-seok, Director of Climate Change Policy at the Ministry of Environment, explained, “If the EV subsidy reform plan is announced late, sales may stop until then,” adding, “I think the announcement timing can be brought forward somewhat compared to this year.”
The Ministry of Environment will also implement measures to prevent battery fire accidents alongside safety subsidies. Minister Han stated, “When the fire occurred at Arisel, there was a fire extinguisher unsuitable for metal fires,” and added, “I instructed to review whether appropriate fire extinguishers are properly installed at EV charging facilities.” She emphasized, “We will consult with the Fire Agency to establish certification standards for metal fire extinguishers and discuss rapid distribution plans.”
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