Get an Extra 1 Million Won Subsidy When You Sell Your Gasoline Car and Buy an Electric Vehicle

Concerns Raised Over Potential for Abuse

Photo unrelated to the article. Yonhap News Agency

Starting this year, consumers who scrap or sell their internal combustion engine vehicles, such as gasoline cars, and purchase an electric vehicle will be eligible to receive up to 1 million won (approximately $770) in additional subsidies.

Additionally, a new "Zero-Emission Vehicle Safety Insurance" will be introduced to cover up to 10 billion won (approximately $7.7 million) for damages to third parties caused by fires during electric vehicle parking or charging, beyond the coverage limits of existing insurance policies. From the second half of the year, subsidies will only be provided to electric vehicles from manufacturers that have enrolled in this insurance.

The Ministry of Climate, Energy and Environment announced the 2026 electric vehicle purchase subsidy reform plan on January 1. Electric vehicle purchase subsidies are divided into central government subsidies and local government subsidies. The reform plan released on this day outlines which vehicles will receive how much in national subsidies this year.

For electric passenger vehicles, as in the previous year, if the base price of the car is less than 53 million won, 100% of the subsidy is provided. If the price is between 53 million won and less than 85 million won, 50% of the subsidy is given. No subsidies are available for high-end vehicles priced above 85 million won.

The ministry has announced that next year, the threshold for full subsidies will be lowered to "less than 50 million won," and the threshold for half subsidies will be "50 million won to less than 80 million won."

The electric vehicle subsidy is basically calculated by considering factors such as driving range per charge, battery energy density and recycling value, adoption of government-designated innovative technologies, whether the manufacturer meets low-emission vehicle supply targets, the number of fast chargers installed, and whether the manufacturer has insurance. Additional incentives are provided for multi-child families and for young people making their first-ever vehicle purchase.

Excluding incentives, this year’s national subsidy for electric passenger vehicles is up to 5.8 million won (about $4,500) for mid- and large-sized vehicles, and up to 5.3 million won (about $4,100) for small vehicles. Hyundai Motor’s Ioniq models have received the highest subsidy amounts so far. The government has been gradually reducing the per-vehicle subsidy each year, but this year it has maintained the same level as last year.

This decision takes into account that the electric vehicle market has just emerged from a "chasm" (a temporary stagnation in demand) during 2023-2024. Seo Youngtae, Director of Green Transition Policy at the ministry, said at a briefing the previous day, "Subsidies are necessary until electric vehicles become mainstream in the automobile market," but added, "However, it will be difficult to increase subsidies beyond the current level." Director Seo also stated that once 40% of newly sold vehicles are zero-emission vehicles, including electric vehicles, it can be considered that they have become mainstream. The "40% share of zero-emission vehicles among new cars" is the government’s target for 2030.

This year, a "transition incentive" has been newly established for electric passenger vehicles. This is an additional subsidy provided when a consumer scraps or sells an internal combustion engine vehicle that is at least three years old and purchases an electric vehicle. If the original subsidy amount exceeds 5 million won, the transition incentive is 1 million won; if it is less, the incentive is proportional to the subsidy amount.

However, there are concerns that this system could be abused. The transition incentive is not provided for transactions between direct family members, including spouses, parents, and children, but it can be received for transactions between other relatives, such as between uncles/aunts and nephews/nieces. For example, an uncle could transfer an internal combustion engine vehicle to a nephew, purchase an electric vehicle, and receive an additional 1 million won in subsidies.

From the second half of this year, manufacturers will be required to enroll in "Zero-Emission Vehicle Safety Insurance." This insurance, to be launched in March, covers up to 10 billion won (approximately $7.7 million) for damages to third parties caused by fires while an electric vehicle is parked or charging, for amounts that exceed the coverage limits of auto insurance or other policies.

Regarding battery density as a factor in determining electric passenger vehicle subsidies, the range of subsidy differentiation between battery density categories has been expanded this year. Last year, if the battery density was at least 500Wh (watt-hours) per liter, the vehicle was eligible for 100% of the performance and battery safety subsidies based on driving range per charge. This year, the threshold has been raised to above 525Wh per liter.

For the innovative technology subsidy, the amount given for the V2L (vehicle-to-load) function, which allows electric vehicle battery power to be used externally, has been reduced from 200,000 won to 100,000 won. Instead, 100,000 won will be provided for vehicles equipped with "Plug and Charge" (PnC) functionality, which enables automatic user authentication and payment processing simply by plugging in the charging connector.

The government is promoting the distribution of "smart controlled slow chargers" to support PnC and similar features. Another key function of smart chargers is to control overcharging by monitoring the "state of charge" (SoC) of the battery, which requires electric vehicle software updates. According to the ministry, Tesla has completed the update, while Hyundai and Kia are in progress. European manufacturers plan to complete the update in the first half of this year. If the real-time SoC feature is not implemented by June, subsidies will be suspended.

The ministry announced that in 2027, a subsidy of 100,000 won will be provided for vehicles equipped with "bi-directional charging and discharging" (V2G) that enables electric vehicles to function as energy storage systems (ESS). The threshold for the "fast charging" function, which provides a subsidy of 300,000 won, will be raised by 50kW starting in 2027.