South Korea: EV subsidies or stimulus for local OEMs
End of October 2020, South-Korean President Moon Jae-in announced the country’s “New Green Deal”, a program that mirrors the EU’s commitment and that aims to achieve carbon neutrality by 2050. Supported by the EU, but forced to commit to a target date after Japan’s and China’s formal announcement to go for net zero targets, South-Korea will be spending $37 billion on green infrastructure, clean energy and electric vehicles.
EV Subsidies V1: Fail
The project includes an ambitious EV chapter: 1.13 million EVs and 200.000 hydrogen vehicles have to hit the roads by 2025. The country already had an incentive scheme in place: a transparent system whereby consumers benefit from a premium that is deducted from the retail price.
At the same time, unsurprisingly, the Governmental premiums are meant to support the sales of Hyundai and KIA’s electric vehicle range, but this didn’t turn out to be the case: 46% of the subsidies, or $176 million, benefited Tesla instead.
The South-Korean Government was heavily criticized for not building in parameters that would favor local manufacturing and had to go back to the drawing table.
EV Subsidies V2: Back to the Korean OEMs
Roughly $8500 bonus was made available for each registered EV, but has now become conditional. Vehicles below $55.000 still receive the full amount, but vehicles priced between $55K and $80K only receive half of the premium, whilst more expensive EVs receive no subsidy whatsoever.
This affects directly the Porsche Taycan, Mercedes EQC, Audi e-tron and Jaguar I-Pace, but also Tesla Model S and Model X. The popular Model 3, at least the long-range versions and all versions with the self-driving option, end up receiving 50% of the premium. The cheapest Model 3 is still in a good place, at least for now.
The Hyundai Kona and Kia Niro EVs fit the profile nicely and receive 100% of the premium; it is to be expected that Hyundai will price its new Ioniq 5 in accordance with the premium thresholds.
For the Fleet Manager
Subsidies are always welcome, but inconsistency is not. Time has not yet come that South-Korean fleets have started electrifying – most of them choosing the highly popular Sonata LPG or the new Tucson diesel, but it is clear that the Government is now past the point where stable incentives are a given. As is the case in most countries, EV incentives start with subsidies and end up with additional taxation on ICE vehicles… To be continued.
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