In 2025, South Korean-made electric vehicles (EVs) will receive relatively higher subsidies than imported vehicles, sparking debates over discrimination. While the industry emphasizes that such measures are necessary to protect the domestic industry, criticism arises that the broader EV ecosystem is being neglected.
According to the industry, on Monday, the national subsidy for EVs this year was reduced by approximately $490 from the previous year, setting the maximum subsidy at roughly $4,060. The subsidy criteria have also become stricter, with additional requirements related to driving range, charging speed, and battery safety.
The Kia EV6 (Long Range 2WD 19-inch) receives the highest subsidy, approximately $4,060. Hyundai’s Ioniq 5 is eligible for subsidies ranging from roughly $3,460 to $4,040, depending on the model, while the Ioniq 6 can receive between approximately $3,680 and $4,040.
In contrast, Tesla’s Model Y receives approximately $1,180, and the Model 3 RWD is granted approximately $1,280. From this year, vehicles not enrolled in product liability insurance or those failing to provide State of Charge (SOC) information will be excluded from subsidies, with a six-month grace period. Tesla has not enrolled in product liability insurance, meaning its subsidies could be cut off starting in July.
BYD’s Atto 3, from the Chinese manufacturer that recently entered South Korea’s passenger car market, is expected to receive up to approximately $1,400 in subsidies.
The difference in subsidies between domestic and imported vehicles stems from battery types. Vehicles equipped with high-energy-efficiency Nickel-Cobalt-Manganese (NCM) batteries receive higher subsidies, whereas those using lower-efficiency Lithium Iron Phosphate (LFP) batteries receive less. Most South Korean vehicles use NCM batteries, while Tesla vehicles and the Atto 3 use LFP batteries.
Even though the difference is attributed to battery types, the relatively higher subsidies for domestic vehicles have sparked controversy.
The industry argues that protecting the domestic industry is natural, given that taxpayer money is being used. An industry representative stated, “Securing dominance in the emerging EV market is crucial, and subsidies are key. Designing subsidy systems that benefit domestic companies is a global trend.”
Under the Trump administration, the United States raised tariff barriers on imports, including automobiles. Recently, under the Inflation Reduction Act (IRA), three Hyundai models—the Ioniq 5, Ioniq 9, and Genesis GV70—were excluded from subsidy eligibility.
Similarly, the European Union (EU) decided last year to impose up to 45.3% tariffs to curb the market share of low-priced Chinese EVs.
On the other hand, some concerns limiting consumer choice could hinder the development of the EV ecosystem, especially during the current temporary stagnation in demand. Last year, South Korea’s EV sales totaled 146,883 units, a 9.7% decrease from the previous year. After peaking at 164,482 units in 2022, sales have declined for two consecutive years. Given that EVs are still more expensive than internal combustion engine vehicles, some argue that subsidies should be actively provided across a broader range of cars.
There are also concerns that these differences could lead to trade disputes. Chinese EV manufacturers have already filed a lawsuit against the EU at the Court of Justice of the European Union (CJEU).
