The government has revised EV subsidies to award extra points based on contributions to domestic industry, raising the prospect of a shift in market dynamics. The local auto industry is also urging the government to include EVs in a planned “domestic production promotion” tax credit — often described as a Korean version of the U.S. Inflation Reduction Act — adding to uncertainty over how incentives will be set.
As of Monday, the market has settled into a two-sided contest between Korean and imported brands, according to the Korea Automobile & Mobility Association and other groups. A total of 220,177 EVs were newly registered in South Korea last year. Kia led with 60,609, followed by Tesla with 59,893 and Hyundai with 55,461.
Imported EV brands have closed in on domestic makers. Imported EVs accounted for 42.8% of the market last year, compared with 57.2% for Korean brands.
The gap narrowed further this year. Tesla, after cutting prices, sold 20,964 vehicles in the first quarter — roughly half its total for all of last year. Over the same period, Hyundai sold 19,040 and Kia sold 34,303.
Industry officials say the chase could be disrupted in the second half of this year, after the government said it will shift subsidy criteria from a focus on vehicle and battery performance to an emphasis on contributions to domestic industry and research-and-development results.
Another potential turning point is a tax-credit plan scheduled to be announced in July. The domestic production promotion tax credit would allow corporate tax deductions tied to domestic production and sales of strategic-industry products, a structure that favors companies with larger investments in local manufacturing facilities.
Hyundai Motor Group has said it will invest 125 trillion won in South Korea by 2030. Tesla, by contrast, has made little domestic production investment, according to the article. Regulatory filings cited by the report show Tesla Korea posted 3.3066 trillion won in revenue last year and recorded 0 won in donations. Most of its vehicles are produced in China and sold in South Korea.
A key question is whether EVs will be included in the tax-credit program, which is currently limited to some advanced industries such as semiconductors and secondary batteries. The Korea Automobile & Mobility Association and others have formally asked the government to add EVs, arguing that subsidies alone have limits in encouraging domestic production.
The association said the share of EVs produced in China in the South Korean market rose to 33.9% last year, and warned that the presence of China-made EVs is increasing. The report also noted that major countries including Japan provide tax credits for EVs through domestic production promotion policies. Still, some concerns have been raised that including EVs in the tax-credit program could shift imported-car prices and reduce consumer choice.
Kim Ju-hong, executive director of the Korea Automobile & Mobility Association, said wider EV adoption is needed to energize the domestic EV industry and meet greenhouse-gas reduction targets in the transport sector.
“We need to grow the ecosystem for both finished vehicles and parts through not only subsidies but also the introduction of a domestic production promotion tax credit,” Kim said.
* This article has been translated by AI.
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