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Delayed Low Carbon Policy Lowers Global Competitiveness of Electric Vehicles
Lowered Incentives
Delayed Low Carbon Policy Lowers Global Competitiveness of Electric Vehicles
  • By matthew
  • September 12, 2014, 09:15
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Renault-Samsung's fully electric SM3ZE, which first came out in 2007.
Renault-Samsung's fully electric SM3ZE, which first came out in 2007.

 

The low carbon incentive system is behind schedule, and the automobile manufacturers in Korea are feeling relieved. However, some fear that Korea might be left out of the global environmentally-friendly automobile market. The low carbon vehicle incentive system, in which automobiles with low carbon emissions receive subsidies and those with a lot of carbon emissions get fines, was scheduled to become effective next year. However, the Korean government recently decided to delay the system until 2020 due to strong opposition from the industrial sector. Automakers altogether welcomed the decision, saying that they earned some more time to develop low carbon vehicles.

The problem is that global automobile manufacturing companies are actively attempting to predominate the market by introducing electric vehicles and plug-in hybrid electric cars. Even though sales of these vehicles are low at the moment, the companies aim to establish the foundations for future growth considering the huge growth potential of the market.

In our neighboring countries of Japan and China, both government and industry are promoting environmentally-friendly vehicles. Alliances of automakers are building infrastructure for an electric vehicle charging system, and the government is encouraging the development of environmentally-friendly automobiles by providing exceptional benefits.

According to KOTRA's Nagoya Office in Japan, Japan recently established a “Nippon Charge Service” through the joint investment of Toyota, Honda, Nissan, and Mitsubishi. The purpose of this service is to operate and manage electric vehicle charging systems, and 70 percent of the operating costs are covered with government subsidies. Companies jointly bear the costs to install charging stands, and share the profits arising from the stations. In order to enhance the rate of distribution, quick charging stands have been installed in 500 Family Mart branches nationwide.

Japanese automakers have started to engage in such joint investment, as there have been complaints about existing charging stations. Consumers pointed out that uncertainties arise from different charging and billing systems at each station. There were two separate companies operating electric vehicle charging stations, CHAdeMO and Japan Charge Network, but the two systems were not compatible with each other due to different verification systems.

In the Japanese automobile industry so far, there have been strong voices saying that sound electric vehicle infrastructure needs to be established in accordance with the status of the world’s biggest electric vehicle exporter. A total of 110,000 Nissan Leafs were sold last year in Japan, the most popular electric vehicle. The Mitsubishi i-Miev is also considered to be one of the major electric vehicles in the global market. The Japanese automobile industry expects that the positive feedback loop of the expansion of electric vehicle charging infrastructure and advancement of electric vehicle-related technologies by automobile manufacturers will be successful.

In China as well, the electric vehicle market has been boosted, as U.S. electric vehicle company Tesla Motors started to build electric charging stations. Tesla officially entered the Chinese market last April by introducing the Model S, and recently announced the construction of 400 charging stations in 120 cities in China together with a Chinese telecommunication service operator China Unicom.

Tesla also plans to build supercharger stations in more than 20 places capable of charging 50 percent of a battery in 20 minutes. Elon Musk, CEO of Tesla Motors, expressed his strong determination in investing in China by saying, “China will be the biggest market of Tesla from now on.”

The Chinese government played the most important role to create the current environment. China is considering significantly lowering the tariffs and value-added taxes for electric vehicles, which account for more than 30 percent of the price of automobiles. Although local automobile manufacturers are strongly opposed to this idea, the government is very determined. The City of Shanghai provided 3,000 free license plates for imported electric vehicles this year. Since unprecedented benefits for electric vehicles continue to exist, global companies such as Volkswagen are competitively planning to launch electric vehicles. Tesla even announced the construction of a production factory for electric vehicles in China within the next four years. In addition, the Chinese government is actively promoting two goals of improving air quality and developing environmentally-friendly automobiles by enthusiastically pushing policies like environmentally-friendly buses and electric taxis.

As of last year, 95,000 electric vehicles were sold worldwide, which more than doubled compared to the previous year. Accordingly, Korea also set up the target to achieve 10 percent of market share in the electric vehicle market by 2015. However, whether or not this plan will be promoted as scheduled is now uncertain due to the delay of the low carbon vehicle incentive system. If this system becomes effective in time, the construction of electric vehicle charging stations would be able to start quickly within this year. But all these plans are becoming loose as well.

An industry professional pointed out, “Even if we successfully develop and introduce high quality environmentally-friendly vehicles after five years, global companies will have already dominated the environmentally-friendly automobile sectors in big markets such as China, South America, and India. If imported vehicles that meet the strict environmental standards of Europe penetrate the Korean market more and more, domestic environmentally-friendly vehicles will have no room to stand.”