Global automakers say Korea is the optimum market for the popularization of electric vehicles because of its small territory, concentration of population in metropolitan areas, and advanced IT and electric power infrastructure. Vincent Carre, electric vehicle (EV) sales and marketing director for the Renault Group, said that Korea is the perfect EV test bed at the International EV Expo that took place in Jeju in March this year.
But the reality is different. According to industry sources and the Ministry of Environment, only 1,871 EVs were sold in Korea by the end of last year, when the actual sales volume was limited to 780 cars, falling short of the target of 1,000. The numbers amounted to 117,990 and 59,239 during the same period in the United States and Japan, respectively. China is trying to supply five million EVs to its domestic market by 2020.
Meanwhile, the Korean government recently cut its target by 2020, from one million to 200,000. Its budget for EV subsidies was reduced from 27.6 billion won (US$24.9 million) to 25.4 billion won (US$22.9 million) between 2013 and 2014. This year’s sell-through is around 800 as of the end of October.
The low sales are because of a lack of cooperation between government arms. The Ministry held a public hearing in June concerning subsidies for low-carbon vehicles, only to end in vain as the Ministry of Trade, Industry and Energy and the Ministry of Strategy and Finance were opposed to its plan. The objectors maintained that the subsidies would greatly compromise the competitiveness of Korea’s auto industry for a very small carbon reduction effect. However, some people have pointed out that the two were against it because of the drop in tax revenue that would be caused by less gas consumption.
At present, the Korean government takes 52.24 percent of the gasoline price as an oil tax. The U.S. only takes 11 percent. A traffic tax of 529 won is imposed on each liter of gasoline, and the overall oil tax increases to 968.92 won per liter when other taxes are added. According to the Ministry of Strategy and Finance, the government collected approximately 13.2 trillion won (US$11.9 billion) in traffic taxes alone last year and 19.4 trillion won (US$17.5 billion) combined in oil taxes, equivalent to 9.6 percent of the total tax revenue for the period. In contrast, only 93.6 percent of electricity charges are estimated to be recovered for now, according to the National Assembly Budget Office.
Korean automakers are not welcoming the popularization of EVs, either. This is because IT and electronics companies can take market share away once the focus of the market shifts to EVs, which has already been witnessed in the case of PayPal co-founder Elon Musk and his Tesla.
Still, experts are warning that the prevalence of EVs and green cars in the future car market is a fait accompli. Market research firms predict the global green car market demand would increase from 2.2 million cars this year to 6.4 million or so in 2020.