'Matching subsidies' to spur growth of Korea's EV market

Kia's EV3 compact electric SUV / Courtesy of Kia

The nation’s electric vehicle (EV) market will pick up stronger-than-expected momentum for a rebound this year — buoyed by the government’s “matching subsidy” policy aimed at boosting carmakers’ discount campaign, experts and industry officials said Wednesday.

Under the updated subsidy rule, the Ministry of Environment decided to increase its matching subsidy rate to up to 80 percent from 40 percent. Its expiration has also been extended to the end of this year from the first half.

When carmakers offer larger discounts on their EVs, the authority increases its subsidy rate in proportion to the range of their discounts.

For example, if a carmaker offers a discount of 6 million won to its EV priced at a range of 45 million won to 53 million won, the ministry offers half of the discount through the matching subsidy. This is an increase of 600,000 won from the previous policy.

The latest decision is widely expected to spur demand for EVs, as carmakers are encouraged to offer bigger discounts for the vehicles, according to experts and officials from the industry.

“The updated matching subsidy rule is desirable at this period of a chasm of EVs before their mass adoption,” said Kim Pil-soo, an automotive technology professor at Daelim University College.

The global mobility paradigm is inarguably centered on EVs, and most developed countries in Europe are also focused on boosting the popularization of fully electric vehicles, according to the professor.

Hyundai Motor's Casper Electric / Courtesy of Hyundai Motor

“The policy will help pull up demand for EVs in the local auto industry, and bring forward the timeline for EV popularization here,” Kim said.

Data also showed more customers are purchasing EVs, with a growing number of carmakers launching price-competitive electric models to meet increasing EV demand here.

According to market tracker CarIsYou, the number of EV sales here reached 33,482 in Korea during the first quarter of this year, up 31 percent from the previous year.

This was driven by robust sales of compact EVs from Hyundai Motor and Kia. Kia’s smallest and lowest-priced EV3 was the top-selling EV with 5,065 sales between January and March. Hyundai Motor’s Casper Electric came in second with 2,724 sales during the same period.

EVs outperformed other types of vehicles in terms of sales growth. Sales for vehicles powered by an internal combustion engine inched down 0.2 percent during the same period here. Sales of hybrids increased with a margin of 5.7 percent, lower than EVs.

Industry officials also expected the latest subsidy rule to help rev up EV sales.

“The decision came at an opportune time when local carmakers face growing tariff risks from the United States,” an official from a carmaker here said.

“We have to focus more on increasing local sales in the face of escalating external trade uncertainties, and the subsidy expansion will help EV makers continue their solid sales throughout this year.”

Also on Wednesday, the government unveiled a package of emergency support measures worth 3 trillion won ($2.04 billion), including the matching subsidy, for the local car industry amid mounting U.S. tariff threats.