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Korea's move to cut subsidies on imported EVs faces backlash

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BYD's K9 electric bus / Courtesy of BYD
BYD's K9 electric bus / Courtesy of BYD

By Park Jae-hyuk

The government is facing a severe backlash from importers of Chinese electric buses, as well as the Chinese Embassy in Korea, due to its plan to reduce subsidies for the purchases of imported electric vehicles (EVs) that use batteries with lower energy density, according to industry officials, Wednesday.

Most Chinese electric buses are equipped with lithium ferro-phosphate (LFP) batteries with lower energy density compared to nickel, cobalt and manganese (NCM) batteries used in Korean EVs.

The protest from China has been mentioned as the main reason behind the government's abrupt decision to delay the announcement of its plan to cut subsidies for the purchases of imported EVs that do not meet certain requirements.

Earlier this month, the Ministry of Environment unexpectedly postponed a plan to announce the reformed rules on subsidies for the purchase of EVs. The environment ministry said at that time that it needs more time to listen to the opinions of automobile industry officials.

When the environment ministry informed automobile industry officials late last year that it may reduce subsidies for the purchases of some imported EVs, its plan was viewed as an apparent countermeasure against the U.S. Inflation Reduction Act (IRA) which denies tax incentives for the purchases of EVs assembled outside of North America.

The Korea Automobile Importers & Distributors Association, comprised of importers of cars made in the U.S., Europe and Japan, particularly opposed the ministry's plan to cut subsidies for the purchases of EVs made by foreign carmakers that do not operate aftersales service centers directly in Korea.

"Most of our members have provided aftersales services in earnest to consumers of EVs by establishing nationwide networks," the association said in a statement at that time. "We are concerned about potential disadvantages to our members and their customers."

In response, the environment ministry reportedly decided to offer subsidies for the purchases of EVs made by carmakers having outsourced service centers in Korea.

However, it is still unclear whether subsidies will be given continuously to the purchases of EVs using batteries with lower energy density. Chinese EV importers have therefore complained bitterly about the new subsidy rules, during the environment ministry's latest briefing session on Jan. 10.

GS Global, a general trading company under GS Group, which imports electric buses from China's BYD, urged the government to give evidence of a link between an EV's performance and its battery's energy density, according to industry officials.

Some Chinese EV importers even reportedly asked the Chinese Embassy in Korea to send a letter to the Korean government to protest the new subsidy rules that are unfavorable to them.

The Chinese Embassy was unavailable for comment on this issue on Wednesday, as it was closed for the Lunar New Year holidays. A GS Global spokesman also declined to comment the same day, as the company's employees dealing with this issue were unavailable to discuss the matter, due to the company-wide holiday.

Despite the backlash from EV importers, calls have grown for the Korean government to make moves to prioritize giving incentives to the purchase of EVs manufactured in its territory, given that the U.S., the European Union and China took similar measures. Korea International Trade Association Executive Vice Chairman Jeong Marn-ki also urged the government recently to take countermeasures against other countries discriminating against made-in-Korea EVs.

Park Jae-hyuk

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