Recently, some EU member states have been rapidly revising their support policies for HEVs and PHEVs, and it has been suggested that Korea's exports of eco-friendly vehicles may also be affected early on.

The Korea Automobile Research Institute published a report on industry trends titled 'EU's eco-friendly car policy towards hybridization' and said that while the EU has recently been focusing its policy support on ZEVs, it is reducing support for HEVs and PHEVs, so it is necessary to continuously monitor the policy trends of EU member states.

The EU, which is leading the way in decarbonizing the transportation sector, has a high proportion of eco-friendly vehicle sales within the region and is emerging as a major export market for Korean eco-friendly vehicles.

In 2021, the combined share of eco-friendly vehicles, including hybrids (HEVs), plug-in hybrids (PHEVs), electric vehicles (BEVs), and hydrogen fuel cell vehicles (FCEVs), among new car sales in the EU was 30.7%, more than double that of regions outside the EU (12.6%).

Following this trend, the EU accounted for a very high 41.2% of Korea's eco-friendly vehicle exports in 2021.

Meanwhile, the EU began to exclude HEVs and PHEVs from the eco-friendly vehicle category and focus its support on ZEVs (BEVs and FCEVs).

The EU's carbon reduction legislation ('Fit for 55'), announced in July 2021, includes a plan to ban the sale of all new vehicles with internal combustion engines (including HEVs and PHEVs) from 2035.

This legislationIt also includes additional large-scale financial support policies for ZEVs, such as expanding the supply of electric vehicle charging stations and strengthening CO2 emission reduction targets.

As criticisms mount that PHEVs' actual emissions are higher than officially recorded emissions, the EU has announced that it is discussing ways to strengthen PHEV emissions testing methods from 2025.

The International Council on Clean Transportation (ICCT) has argued that support for PHEVs should be reduced because, based on empirical analysis, real-world CO2 emissions from PHEVs are about two to four times higher than officially recorded emissions, and actual electric driving by consumers is lower than PHEV emissions test settings.

According to Reuters, the EU is discussing strengthening PHEV emissions testing methods from 2025, and if the new testing method is introduced, automakers will likely have to reduce PHEV sales and increase BEV sales to avoid fines.

Starting in 2021, the EU will require new cars to be equipped with onboard fuel consumption meters (OBFCMs) to capture real-world driving data from consumers, and will review the revision of emissions testing methods based on this.

Currently, EU member states offer corporate and income tax breaks for eco-friendly corporate vehicles, but will limit support for HEVs and PHEVs around 2022.

The EU is using the tax reduction system for corporate vehicles as a key support policy for eco-friendly vehicles, as corporate vehicles account for more than 50% of new car sales.

France announced that it will tighten the corporate vehicle tax (Taxe sur les véhicules de société) pollution tax base (CO2 emissions) and abolish the temporary exemption for most HEVs and some PHEVs from 2023, while Belgium began limiting depreciation deductions for non-ZEV corporate vehicles acquired after 2023 and will introduce a PHEV tax from 2023.Limit fuel cost deductions for EVs.

Germany plans to strengthen the electric driving range requirement among the deduction provisions applied when imposing income tax on employee benefits in kind for PHEV corporate vehicles starting in 2022.

Additionally, EU member states are reducing purchase subsidies for PHEVs.

Ireland had been providing subsidies for PHEVs at the same amount as for BEVs, but halved the subsidies for PHEVs in July last year and ended them in January 2022.

Germany has strengthened the electric driving range requirement for subsidies for PHEVs (from 40 km to 60 km) starting in 2022, and is reportedly considering an early end to subsidies starting in 2023.

The Irish and German governments reportedly cited the fact that PHEVs' actual emissions are higher than their official figures and that the market for PHEVs has already been formed, making support unnecessary, as the reasons for reducing or eliminating subsidies.

Meanwhile, the Korea Automobile Research Institute said, “There will be a need for a regular monitoring window for policy information so that Korean industry officials can timely understand the eco-friendly vehicle policies of EU member states and other major countries.”