The South Korean government is planning to limit its electric bus subsidies to those equipped with batteries meeting strengthened safety standards. This is to assuage South Korean companies’ complaints that the government has provided subsidies for Chinese electric buses whereas no subsidies have been given by China to South Korean electric vehicle batteries.
The strengthened safety standards refer to the electric bus battery standards introduced in December last year by the Korean Agency for Technology and Standards of the Ministry of Trade, Industry and Energy. The final plan is scheduled to be announced next month.
Industry analysts are expecting that the competitiveness of South Korean electric buses will be improved based on the measure. At present, those buses use lithium-ion batteries whereas Chinese electric bus companies mainly use domestically produced LiFePo4 batteries, which are cheaper yet inferior in output and stability.
Cheaper buses equipped with Chinese batteries are currently increasing their presence in the South Korean market. Last year, Chinese companies sold 63 electric buses in South Korea while Hyundai Motor Co., the largest electric bus supplier in the country, sold 56. This has to do with the lower price of the former. Hyundai’s large electric bus is priced at approximately 400 million won whereas each of the former is cheaper by more than 100 million won. In addition, the South Korean Environment Ministry’s subsidy lowers the price to around 200 million won.
This is why South Korean companies have called for the ministry to provide its subsidies for selected beneficiaries. “The Chinese government has given no subsidies since 2016 to electric vehicles equipped with South Korean batteries in order to accelerate the growth of local industries, and it makes no sense at all to spend South Korean taxpayers’ money on Chinese electric vehicles,” said the Korea Automobile Manufacturers Association.
“Subsidies for selected beneficiaries cannot be an ultimate solution in that Chinese batteries and electric buses are improving in terms of quality,” said an industry expert, adding, “Still, South Korean companies can buy at least some time in further enhancing their price and quality competitiveness.”