The South Korean government has set high goals for its electric vehicle industry over the next ten years, and is making heavy investments in both the vehicles themselves and in the infrastructure necessary to support them. The government announced late last year that it would be providing the equivalent of about $900 million in subsidies for electric and fuel cell cars and infrastructure. 738.2 billion won ($609 million) would go to battery electric vehicle (BEV) subsidies and infrastructure, while 359.3 billion won ($296 million) would be earmarked for fuel cell vehicles (FCEVs) and hydrogen filling stations. Since the initial announcement, however, the government has increased its budget for BEV subsidies to 950 billion won.
What are the subsidies for electric cars in South Korea?
Hydrogen is a key focus in the government’s goals to decrease dependency on fossil fuels and increase the performance of its electric vehicle industry. In January 2019, the country announced its target of having 80,000 fuel cell cars on the roads in South Korea by 2022, and these new subsidies will contribute to that goal. In 2020 alone, the government is aiming to increase the number of BEVs being driven in the country by over 70,000 and the number of FCEVs by 10,000. To facilitate this, purchases of these vehicles will be eligible for subsidies of between 8 million and 22.5 million won ($6,600 to $18,600). In terms of infrastructure, the aim is to increase the number of hydrogen filling stations in the country to 660 by 2030, and EV charging stations are to increase to 15,000 by 2025.
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By 2030, South Korea’s goal is to have BEVs and FCEVs make up fully a third of traffic on the country’s roads. The government expects Korean companies to contribute to this goal, calling on them to invest 60 trillion won ($52 billion) in new vehicle technology over the next ten years. By that time, the country aims for a quarter of all exported cars and a third of the domestic market to be electric vehicles.
What is South Korea’s position in the electric vehicle industry?
The electric vehicle industry is a large one, and is growing quickly. It’s been valued at over $100 billion, and unit sales are expected to jump by nearly 5 million units between 2020 and 2023. APAC currently makes up over half of the global market, boasting the highest CAGR over the next few years and making the greatest contribution to market growth.
However, South Korea does not currently find itself as high up in the electric vehicle industry as it would like. Technavio lists China, the US, and Japan as key leading countries in the market, with China leading by a very substantial margin. The government’s goal is to hold 10% of the global electric vehicle market by 2030, which would put it ahead of Japan. The planned investments from both the government and vehicle manufacturers are intended to help the country achieve this over the course of the decade. There are currently only a few electric vehicle models available in South Korea, and greater contributions from local companies will increase diversity in the market and provide consumers with more purchase options.
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How will subsidies impact the electric vehicle industry in South Korea?
The new subsidies from the South Korean government are very substantial. To put them in perspective: Germany announced this past November that it would be increasing electric vehicle subsidies by 50%, up to as much as 6,000 euros (almost $6,700). The ceiling for subsidies in South Korea is close to three times that amount.
While this may sound like a massive subsidy that will encourage many more purchases, it does have its downsides. The value to individual consumers is high, but the actual number of subsidies is limited. Demand for these subsidies is therefore greater than the amount available, and so electric vehicle purchases tend to top out at the number of subsidies provided. It’s significantly harder to afford an EV without a subsidy, and even when people are able to, they often don’t want to pay the higher, non-subsidized price when they could be getting the vehicle for cheaper. For example, in 2018 approximately 34,000 EVs were sold in the country because that was the number of subsidies available for them. So while high subsidies will certainly encourage consumers to purchase EVs, if the goal is to increase the total number of EVs sold then it may be more impactful to offer a higher number of lower-value subsidies instead.
The effectiveness of these measures may remain to be seen, but they are still important steps towards improving the environment. Seoul and the rest of South Korea experience high levels of air pollution and traffic noise, and the greenhouse gas emissions produced by vehicles are contributing to hotter summers and more extreme weather. Electric vehicle emissions are far lower than those of other vehicles, and the cars are significantly quieter as well.
South Korea’s environmental initiatives
Along with its focus on EVs, South Korea is also increasing its focus on solar power. Seoul’s “Solar City” project aims to provide power to all public buildings and 1 million households via solar power by 2022, and is also working to make certain streets and districts solar-powered. South Korea plans to generate 35% of its electricity from renewable sources by 2040, and plans to power three new cities with hydrogen by 2022. While South Korea may be somewhere in the middle of the pack when it comes to renewable power sources and EV adoption, all of these plans show that the country is working hard to become a world leader over the course of the next decade.
Learn more about the global electric vehicle industry with Technavio’s market research report, including:
- CAGR of the market during the forecast period 2019-2023
- Detailed information on factors that will accelerate the growth of the electric vehicle market during the next five years
- Precise estimation of the global EV market size and its contribution to the parent market
- Accurate predictions on upcoming trends and changes in consumer behavior
- The growth of the electric vehicle industry across the APAC, Europe, MEA, North America, and South America
- A thorough analysis of the market’s competitive landscape and detailed information on vendors
- Comprehensive details of factors that will challenge the growth of electric vehicle manufacturers