The domestic market for eco-friendly cars such as electric vehicles (EVs) and hydrogen cars is expanding rapidly. Market watchers say that it is necessary to improve Korea’s electric car subsidy policy in order to boost the competitiveness of Korean green cars as sales of imported eco-friendly cars are growing faster than those of Korean-made ones.
Domestic sales of environment-friendly cars grew at an annual average rate of 34.1 percent over the past five years, the Korea Automobile Manufacturers Association (KAMA) said on June 4. Korean-made green cars sales rose by 30.7 percent during the period, much lower than 176.8 percent of the U.S. brands, 145.2 percent of German cars and 35.3 percent of Japanese brands. That is to say, sales of imported eco-friendly cars grew faster than domestically produced ones in Korea.
Quite notable was a sharp increase in sales of EVs and hydrogen cars eligible for subsidies. EV sales grew by an annual average of 119.3 percent over the past five years, and their share in green car sales jumped from 2.1 percent in 2013 to 24.9 percent last year. Hydrogen cars were first launched in 2015 and their sales hit 730 units last year. But their market share was a mere 0.6 percent as of last year.
In contrast, hybrid vehicles showed an annual average growth rate of only 27 percent over the past five years, and their market share fell to 74.5 percent from 97.9 percent in the same period. "Hybrid vehicles are only tax-deductible, but electric cars are eligible for an additional subsidy of up to 19 million won. Thus, this benefit seems to balloon electric car sales," a KAMA official said.
KAMA has been calling on the government to improve its subsidy policy to ramp up sales of domestically made eco-friendly cars in Korea. As subsidy benefits are equally applied to domestically produced and imported cars, low-cost imported cars tend to have price competitiveness compared with domestically produced ones. Actually, according to KAMA, Chinese eco-friendly buses, which receive a subsidy of up to 330 million won per unit, represent 50 percent of the Korean electric bus market. About 40 percent of government subsidies go to imported Chinese electric buses in Korea.