By Kim Hyun-cheol
Staff Reporter
Those who buy hybrid vehicles to replace their old ones may receive a subsidy of up to 2 million won ($1,600) from next year.
The plan is aimed at boosting carmakers' efforts to build hybrids and help the nation's "green growth'' initiative.
New incentives besides the new tax cut will be necessary to cut down prices of the environmentally-friendly vehicles in order to shore up the car industry, the Ministry of Knowledge Economy (MKE) said Sunday.
"The measure is likely to be introduced with the aim of facilitating the green growth effort, because it's regarded as an effective way to make hybrid cars more affordable to customers," an official at the ministry said.
An inter-ministerial review is now under way to discuss details of the policy. If finalized and approved, hybrid car buyers could save over 5 million won in total when combining tax breaks and the subsidy.
Last month, the ministry launched a new program that will save buyers up to 3.1 million won with the exemption of the special excise, registration and acquisition taxes.
"Mini-cars," however, were ruled out from the scheme and were excluded from the tax cut package earlier this year.
The government has said it will consider additional subsidies for mini and hybrid vehicles but no action has been taken so far.
In the wake of the announcement of the tax cut scheme in March, policymakers faced a growing backlash, with critics arguing it is favoring larger sedans, contrary to its claim that the aim of its policy is to encourage consumers to go eco-friendly and fuel-efficient.
Hybrid cars will have a sharper edge in the market for economical efficiency, industry watchers say, as gasoline prices are expected to go up with the economic recovery.
High oil prices and strengthened regulations worldwide on the environment, among other factors, are encouraging countries to increase the development of more eco-friendly vehicles, according to a report by the Korea Automotive Research Institute.
The subsidy is also being pondered at a time when Korea is behind Japan and other advanced countries in the development of hybrid vehicles and other environmentally-friendly cars. Toyota and Honda are planning to introduce their own eco-cars soon.
Toyota's latest Prius model is scheduled to be introduced in October, while Honda is also considering the debut of its hybrid model Insight in the near future. The Prius, with a price tag around 30 million won, has great mileage.
Among local makers, Hyundai Motor last month released the liquefied petroleum injection (LPI) hybrid edition for the Avante compact sedan.
Hyundai looks to unveil the hybrid edition of its best-selling Sonata sedan next year.
The No. 1 Korean maker is already offering subsidies to its hybrid customers. Residents of Gwacheon, Gyeonggi Province, get subsidies of as much as 2 million won from the maker and the city government when purchasing Hyundai and Kia hybrid models.