Maximum support amount for EVs to shrink, pushing manufacturers to reduce production costs
The maximum subsidy available for electric passenger vehicles in Korea will be reduced to 5.8 million won ($3,950) this year, a more than 10 percent decrease from last year, according to the Ministry of Environment.
In an updated subsidy plan unveiled by the ministry on Thursday, subsidies for buyers of midsized and large EVs will be cut from a maximum of 6.5 million won last year to 5.8 million won, while for small EVs it was cut by 200,000 won to 5.3 million won. Additionally, the price range for vehicles eligible for full subsidies was lowered from a maximum of 55 million won to 53 million won.
The EV support program aims at encouraging manufacturers to lower production costs and offer discounts to reduce consumer burden.
As a part of the efforts, the ministry will cover up to 40 percent of the discount amount as an additional incentive for manufacturers offering promotional price cuts.
The authority will also strengthen support for younger buyers aged between 19 and 34 purchasing their first EVs and families with multiple children.
The ministry has tightened safety standards for subsidies to address public concerns about EV safety following a fire in August last year that engulfed the underground parking area of an Incheon apartment complex and burned over 80 vehicles, after igniting from a Mercedes-Benz EV.
EVs that do not provide battery state-of-charge information to charging stations will no longer qualify for subsidies, as overcharging was suspected to have contributed to the EV fire. Manufacturers without product liability insurance also will be excluded from the program as announced as part of the government’s plan to improve battery safety in response to the incident.
A detailed plan setting forth the subsidy amounts for each EV model is to be announced later in January. By the end of the month, EV consumers are expected to begin receiving support as the government accelerates efforts to tackle declining market demand amid the unstable economy worsened by political turmoil.
“This year’s subsidy revision could be released a month earlier than last year, as discussions started in advance to address EV-makers’ requests to shorten the period that the subsidies are not given,” said an Environment Ministry official.
“We will take swift action to boost EV sales and improve the market by supporting vehicles with better quality and safety, while also supporting consumers.”
