Subsidies Limited to Electric Vehicles
Hydrogen vehicles, which have been one of the three new industries the Moon Jae-in administration has promised to nurture, have been left out in the Green New Deal. Government subsidies for eco-friendly vehicles that were originally included in the third supplementary budget have been limited to electric vehicles only. While the government has been extremely keen on expanding support for electric freight vehicles, which have been very much high in demand recently, it has left out hydrogen vehicles in its subsidy scheme despite a steep rise in demand.
The third supplementary budget plan submitted to the National Assembly included an additional 101.5 billion won (US$83 million) for an expanded supply of electric freight vehicles and two-wheeled electric vehicles. In the main 2020 budget proposal, the government planned to supply 5,500 electric freight vehicles and 11,000 two-wheeled electric vehicles, respectively. According to the latest supplementary budget, 5,500 electric freight vehicles and 10,000 two-wheeled vehicles will be supplied additionally.
Demand for electric freight vehicles has seen a sharp increase in the domestic market. The number of the Hyundai Porter III EV and Kia Bongo III EV sold in the domestic market up until this May totals 4,458, which is already close to the goal set in the main 2020 budget proposal.
An official from the Ministry of Environment said, “The target number for the electric freight vehicles including the number indicated in the latest budget plan is 11,000. Assuming from the number of provisional contracts made by individual proprietors and small business owners, it is very likely that the market will meet the target set by the government.” An automotive industry insider said, “It is not that difficult for carmakers to manufacture several thousands more electric vehicles if there is demand.”
Demand for hydrogen vehicles is growing as well. Sales of hydrogen vehicles until this May recorded 2,995, about three times the 1,068 units sold in the same period of last year. Some point out that if demand for the vehicles becomes the base for drawing up additional budget, just as the Ministry of Environment asserted, additional budget for hydrogen vehicles should have been allotted as well. The government also believes that the market will meet the target for hydrogen vehicle supply. An official from the Ministry of Environment said, “Judging from the number of provisional contracts and the current trend in automotive purchase, there is no concern that the government’s target of supplying 11,000 hydrogen vehicles will be met by the end of this year.”
Meanwhile, the government is under fire for channeling subsidies for electric passenger cars to subsidies for electric freight vehicles. This change in budget spending means that the government failed to accurately forecast the market demand in the first place.
The government originally planned to supply 65,000 electric passenger cars and 7,500 electric freight vehicles. However, only about 8,000 electric passenger cars were sold just until this May. Compared to the same period of last year (14,141 vehicles), sales have plummeted by half. The government’s change in its budget spending can be attributed to the depressed sales in electric passenger vehicles.