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Korea to slash tax credits for EVs with Chinese batteries

Published: 21 Jan. 2024, 16:33

SARAH CHEA
[email protected]

EVs are being charged at a major shopping mall in downtown Seoul on Sept. 25. [YONHAP]

Korea will likely cut tax credits for EVs that are powered with Chinese batteries in a move to keep China in check and prevent its dominance on Korean roads.

The Environment Ministry is currently collecting feedback on its newest EV credit regulations which aim to offer low credits to EVs with less energy density, according to multiple local reports.

The new policies include that it will differentiate the amount of credits based on the EVs' energy density and recyclable value. It will come up with a new system that calculates the battery weight and energy density.

This will likely benefit Korea-made EVs that come with high-performance nickel-cobalt-manganese (NCM) batteries, where Korean battery makers hold a firmer standing. NCM batteries are pricier than China's lithium iron phosphate (LFP) batteries but translate higher energy density and are made with materials that have higher recyclable value.

The measures come as China-made EVs are slowly expanding their presence on Korean roads.

Korea's imports of Chinese EVs stood at $590 million last year, up 255.6 percent on year, becoming the No. 2 country beating the United States for the first time.

The Shanghai-made Model Y was the biggest contributor, with a total of 13,885 units sold in 2023 alone. It was the No. 1 imported EV in Korea in terms of sales.

Tesla released the Model Y, equipped with cheaper Chinese batteries, for the Korean market with a price tag around 20 million cheaper. Tesla is also set to release a similar version of the Model 3 in Korea soon.

Kia's Ray EV, KG Mobility's Torres EV and Volvo's EX30 also use LFP batteries.

The Korean government is also pushing a policy to offer higher credits to automakers that have more after-sale service centers in the country. This will likely benefit Korean manufacturers like Hyundai and Kia instead of imported brands.

The Environment Ministry is also pushing to offer full subsidies to EVs with a sticker price below 55 million won ($41,200). Currently, all EV models that cost less than 57 million are eligible for 100 percent of the credits.

But buyers of their first EVs, young people and vulnerable populations will likely receive additional subsidies, though specific guidelines and standards have not been confirmed.

The government will announce the revised regulations within the month. They will likely go into effect as early as February.

BY SARAH CHEA [[email protected]]