Incentives Offered to Replace Aging Cars
By Kim Hyun-cheol
Staff Reporter
Korea had decided to tackle one issue of global warming by offering incentives for consumers to replace their exhaust fume-spewing aging cars with more eco-friendly ones.
The Ministry of Knowledge Economy said Thursday it will enact the new auto tax cut in an effort to facilitate domestic demand and help local carmakers weather the global economic downturn.
Under the temporary measure, buyers of new cars will enjoy up to 2.5 million won ($1,860) in tax cuts or 70 percent of all vehicle taxes, including the special excise, registration and acquisition taxes.
The beneficiaries will be the 5.5 million drivers who registered their current vehicles before 2000, or 32.6 percent of all registered cars in the country.
The program is in addition to other measures such as subsidies for scrapping old cars and exemption of environment charges for diesel vehicles, and further incentives ― including some for leased-car drivers ― could be added, a government official said.
In announcing the plan, Knowledge Economy Minister Lee Youn-ho urged carmakers to initiate self-rescue efforts and improve labor relations to tide over the global economic downturn. He added that the plan to rescue carmakers would get legislative support only when they initiate business rationalization programs.
The ministry expected the measures to boost car sales by as much as 260,000. Industry watchers welcomed the package overall but were still careful about their forecast.
``It's very timely. There will also be discount campaigns from carmakers to take advantage of synergy,'' Seo Sung-moon, an analyst of Korea Investment & Securites, said. ``As such, car sales could rise by up to 200,000 vehicles this year.''
In a less rosy analysis, Yong Dae-in of Hanwha Securities expected the package to create demand for 50,000 to 100,000 vehicles. ``It appears good enough to be a thirst quencher for carmakers. The tax cut was larger than expected,'' he said.
Several countries are rolling out various tax cuts to stimulate their domestic auto markets.
Germany has recently launched a large-scale consumption-boosting package with a budget of 1.5 billion euros ― buyers who replace old cars are subsidized by up to as 2,500 euros ― and Brazil has completely abolished a 7-percent product tax on vehicles with an engine capacity of 1 liter or less.