“Protect our continent and companies”… Electric vehicle subsidies become a means of restraining other countries
Korea and UK to Expand Electric Vehicle Infrastructure, Reduce Electric Vehicle Subsidies and Suspend Payments

The electric vehicle subsidy policy, which was initiated to revive the electric vehicle industry and achieve decarbonization, is transforming into a means to restrain other countries and is being reduced or discontinued depending on the environment of each country.

The electric vehicle industry is beginning to revive as countries around the world, including ours, join forces to reduce carbon emissions and agree to decarbonize the transportation sector, which accounts for 17% of global greenhouse gas emissions, in the hopes of leaving a better world for future generations.

The electric vehicle subsidy policy is a representative promotional policy that has suppressed the increase in vehicle prices by providing differential subsidies to electric vehicles below a certain price, and has led to the popularization of electric vehicles while reducing the burden on consumers.

Each country has been working to expand the supply of electric vehicles by leading the way in environmental friendliness, such as reducing carbon emissions, and implementing its own electric vehicle subsidy policies, which has been effective in fostering the electric vehicle industry.

Meanwhile, when looking at the electric vehicle subsidy policies of countries currently leading the electric vehicle industry, they are divided into countries that have stopped providing subsidies to electric vehicles altogether and countries that have protectionist policies and will only provide subsidies to electric vehicles produced in their own country or on their own continent.

The electric vehicle industry is showing a protectionist stance. Representative countries such as France and the United States strongly oppose other continents in their electric vehicle subsidy policies.

According to the IRA, Inflation Reduction Act, announced by the United States on the first day of 2024, electric vehicles from other countries, including ours, were not included at all.

The U.S. government drastically reduced the number of electric vehicle subsidies from 43 to 19, excluding all vehicles that use Chinese batteries such as CATL, and also gave low scores to vehicles that are not assembled in North America (Canada, the U.S., and Mexico) and excluded them from the subsidy.

This is because the detailed regulations related to the IRA's Foreign Concern Organisation (hereinafter referred to as FEOC) were applied in December last year.

The US government has designated most battery component companies in China as ineligible for subsidies if they use parts made by FEOC.

In addition, if a Chinese company establishes a joint venture with a foreign company outside of China, it is considered a foreign concern if the Chinese shareholding is 25% or more.

Contrary to concerns that the US announcement of the IRA last year would bring about a major crisis for our country's automobile industry, Hyundai Motor Group dug into the fact that commercial leases and rental vehicles can receive tax deductions, and captivated American consumers with vehicles of appropriate size (such as the Ioniq 5 and 6) that are smaller than the large SUVs that are representative models of US OEMs, but larger than the Chevrolet Bolt EV.

However, since our country imports most of the key minerals for batteries from China, it seems necessary to prepare plans that can flexibly respond to changes in the U.S. policy that is strengthening its containment of China.

France reformed its electric vehicle subsidies last December, giving a big boost to European electric vehicles, while among Korean vehicles, it revised the system so that only the Hyundai Kona model is eligible for subsidies.

Kia's Niro and Sorento, which were eligible for existing subsidiesWe were excluded.

The biggest change in French policy is that subsidies will be awarded based on an environmental score, meaning that carbon emissions will be thoroughly monitored throughout the entire process from producing electric vehicles to transporting them.

In particular, as maritime transport carbon emissions are also taken into account, it has become a very unfavorable policy for electric vehicles produced in Asia, and some are analyzing that this is intended to exclude Chinese electric vehicles from subsidy payments.

In conclusion, a total of 78 vehicle models from 22 brands can receive subsidies under this French policy, which accounts for 65% of electric vehicles sold in France.

Vehicles such as Nissan's TOWNSTAR, Toyota's PROACE CITY VERSO ELECTRIC, and Tesla's Model Y were eligible for subsidies because they were produced in Germany.

While Korea and the UK have focused on popularizing electric vehicles so far, they are now moving towards providing infrastructure, including electric vehicle chargers.

At the '2023 Electric Vehicle Leaders Forum' held last December, Ryu Pil-moo, director of the Ministry of Environment, announced that although the total subsidy for electric vehicles in 2024 has decreased compared to 2023, the plan is to increase the budget invested in infrastructure to resolve the inconvenience of electric vehicle drivers.

We plan to invest in infrastructure and expand the convenience of charging stations.

Director Ryu said, “As of November 2023, we are taking steps to increase the number of chargers from approximately 290,000 to 1.23 million by 2030,” and added, “We will review and implement policies to ensure that the charging industry and the spread of electric vehicles are intertwined.”

When the UK Department for Transport announced that it would end subsidies for electric vehicles in 2022, it signalled that it wanted to use the money to expand charging infrastructure. there is.

The UK originally provided subsidies of up to 2.4 million won for the purchase of electric vehicles priced under 50 million won.

A survey by the Society of Motor Manufacturers and Traders (SMMT) found that one in six new cars sold was electric, but this is expected to drop to less than one in 10 by 2023 due to the end of subsidies.

The UK is keeping its word by significantly expanding payment and charging convenience, following recent EU legislation that requires electric car fast-charging points with a minimum output of 150kW every 60km on major roads from 2025.

The UK has earmarked around £450m to expand local electric vehicle infrastructure, with the UK's charging infrastructure set to increase by 42% between 2022 and 2023.

The UK Parliament also passed a law last October requiring charging station operators to provide key data, such as charging station prices, online, which some say is providing an experience that outweighs the value of the subsidy.

Germany also announced in mid-December last year that it would stop providing subsidies for electric vehicles, reversing its previous policy of providing subsidies until the end of 2024.

The reasons for the cessation of subsidies are different from those of the countries mentioned above.

Germany's Constitutional Court ruled last month that the redirection of 60 billion euros (approximately 85.7 trillion won) of the budget earmarked to respond to COVID-19 to a climate change response fund was unconstitutional, leading to a change in the electric vehicle subsidy policy.

Germany is expected to account for 25.9% of electric vehicle sales in Europe by November 2023, making it the largest sales country, accounting for about 6% of the global market. It is also the second largest sales country for Hyundai Motor Group outside of Korea, so there is analysis that it could have an impact on the entire market.

Germany last SeptemberElectric vehicles for corporate use were also excluded from the subsidy target, but electric vehicle sales in Germany fell by 29% that month, so future trends will need to be monitored.

The KDB Future Strategy Research Institute reported in an issue brief titled “Germany’s Suspension of Electric Vehicle Subsidies and Its Domestic Impact” that price competition is expected to intensify in 2024, with each brand lowering its electric vehicle sales price, and that demand for low-priced electric vehicles is expected to increase in the medium to long term.