By Kim Hyun-cheol
Staff Reporter
From next month, motorists can save up to 2.5 million won ($1,874), or 70 percent of all vehicle taxes when they replace old cars with new ones.
The Ministry of Knowledge Economy said Sunday the benefit would be effective until the end of this year.
Owners of the 548,000 vehicles here manufactured before 2000 will be eligible for the benefit. They account for 32.6 percent of all registered cars in Korea.
Policymakers expect additional sales of 250,000 vehicles through the incentive but research institutes said the actual sale will be lower than the estimate.
Buyers of new cars must sell or scrap old vehicles within two months of their purchase to enjoy the incentive.
Subsidies for mini cars have not been finalized but Seoul officials expect the National Assembly to provide greater subsidies for the smaller cars during legislation.
A revision on vehicle tax laws will be made soon, and automobile financing companies will be given more discretion to expand financing for automobiles, the ministry said.
The government will encourage its offices, municipalities and state-run companies to first replace vehicles that meet the requirements.
Currently, several countries offer various tax cuts to stimulate demand for new cars.
Germany provides up to 2,500 euros for those replacing old cars to buy new ones, and Brazil has completely abolished a seven-percent product tax on certain vehicles.
A joint fund by provincial governments and local banks will be established to support car parts manufacturers. Institutional investors will be encouraged to raise another 1 trillion won to boost mergers and acquisitions of car parts makers at home and abroad.