Tuesday, March 31, 2020
S. Korean Gov’t Gives Out Lavish Subsidies to Chinese EV Producers
Korean Battery Makers Suffer from Discrimination in China
S. Korean Gov’t Gives Out Lavish Subsidies to Chinese EV Producers
  • By Jung Suk-yee
  • April 24, 2019, 10:52
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Chinese companies sold more electric buses than Hyundai Motor in South Korea last year as they receive subsidies from the South Korean government. 

Chinese companies sold 63 electric buses in South Korea last year. The figure surpassed 56 units sold by Hyundai Motors Co., the largest electric bus producer in the nation, over the same period. This was largely due to the fact that the price of Chinese buses was 100 million won (US$87,530) cheaper than domestic ones.

In stark contrast, South Korean car producers are struggling to enter the Chinese electric vehicle (EV) market. The Chinese government has excluded electric vehicles equipped with South Korean batteries from its subsidies list from 2016. This is why Hyundai Motor has decided to use Chinese batteries in the New Uiedong Electric after it failed to receive subsidies because of the use of South Korean batteries.

The South Korean government’s subsidy policy is not discriminatory. It pays subsidies to all electric vehicles, regardless of whether they are produced at home or abroad, if they obtain a certain certification and meet evaluation standards. Chinese firms benefit from this generous policy. For electric buses, more than 40 percent of the subsidies provided last year went to Chinese buses. The size of subsidies paid to Chinese companies is expected to grow further.

Chinese EV producers enjoy the benefit in the South Korean market, but South Korean companies are still having difficulty in China. The Chinese government does not pay subsidies unless electric cars are loaded with Chinese batteries. On the surface, China’s EV subsidy policy looks not so different from that of South Korea. They give subsidies based on the evaluation items and standards of electric vehicles and batteries. In fact, however, the Chinese government excludes electric cars equipped with non-Chinese batteries from its subsidies list.

In general, experts point out that China’s subsidy policy is definitely problematic under international law but they believe that it is not easy to make it right. The WTO states that foreign companies and domestic companies should be treated equally through the national treatment principle. However, the South Korean government needs to explain concretely which part of the subsidies payment method in China has problems in order to straighten out China’s discriminatory policy. The problem is that China does not clearly disclose the process of selecting EVs qualified for its subsidies.

The Korea Automobile Manufacturers Association (KAMA) said the South Korean government paid 110.80 billion won (US$97.02 million) of subsidies to foreign electric cars last year. Some insist that the government should abolish the subsidy system as taxpayer’s money is spent on enriching foreign firms. However, the industry claims that the subsidies are essential to promote the EV industry.