​Electric vehicle subsidies, the strategy of ‘first country first’ prevails… The need for policies that can increase net profit


An analysis showed that the electric vehicle subsidy policies of countries around the world are hiding their own priority in order to ultimately take the lead in the electric vehicle market. The view that the carbon-neutral contribution from the activation of electric vehicle purchases is only an incidental outcome.

The Korea Automobile Research Institute on the 21st published a report titled, ‘Electric vehicle subsidy policy, should pay attention to the hidden benefits’ to understand the underside of electric vehicle subsidies and emphasized the need for a reasonable strategy by the Korean government.

First of all, electric vehicle subsidies bring effects such as increasing domestic sales, enhancing external competitiveness, and shared growth of related industries such as parts and infrastructure while reducing the cost of electric vehicle production by domestic automakers. As a result, governments around the world are promoting their own electric vehicles with different methods of subsidizing electric vehicles. Although explicitly discriminating against products from a specific country is against international norms such as the World Trade Organization (WTO) or the Free Trade Agreement (FTA) between countries, electric vehicle subsidy policies that are advantageous to local automakers can be found easily in many parts of the world. explanation.

For example, China and Japan are operating subsidy policies that favor the technological characteristics of their own cars. The Chinese government recognizes an exception to the subsidy standard (vehicle price of 300,000 yuan (about 57 million won) or less) for vehicles to which BaaS technology is applied, and extended range electric vehicles (EREVs) are also included in the electric vehicle subsidy. Many countries do not subsidize EREVs because external charging is not possible and the engine is always running. However, China has taken the strategic choice of subsidizing the production of EREVs by its own enterprises.

Based on the fact that electric vehicles can supply emergency power in the event of a disaster, Japan is giving preference to domestic electric vehicles, such as subsidizing electric vehicles equipped with an external power supply function. Accordingly, most Japanese-made battery electric vehicles (BEVs) and plug-in hybrid vehicles (PHEVs) have an external power supply function. The upper limit of subsidy per vehicle is 200,000 yen higher than that of foreign electric vehicles without this function.

Germany pays a relatively high amount of subsidies to PHEVs equipped with internal combustion engines compared to other European countries, as domestic automakers show their strength in internal combustion engine technology. Last year, the German federal government paid subsidies of up to 9000 euros (about 12.2 million won) to BEVs and 6,750 euros (about 9.1 million won) to PHEVs.

In addition, Italy and Germany are adjusting the payment amount according to the time of sales of their own electric vehicles. Italy added a special subsidy of up to 2,000 euros per electric vehicle with the start of sales of Fiat’s ‘New 500 Electric’ last year. Germany’s Volkswagen electric vehicle ‘ID.’ From 2020, when the series was launched, the subsidy per electric vehicle has been increased by up to 9000 euros. The payment deadline has also been extended until 2025.

France and China are limiting the sale of expensive imported electric vehicles by setting an upper limit on the subsidy price as their automakers concentrate on the production of small electric vehicles. Last year, France paid a purchase subsidy of up to 7,000 euros (about 9.5 million won) for electric vehicles under 45,000 euros (about 61 million won). On the other hand, payments over 45,000 euros are paid only at 2,000 euros.

As the Tesla Model 3 became so popular, China tried to curb sales of Tesla by excluding electric vehicles priced at 300,000 yuan or more from subsidies from 2020. However, immediately after the measure, Tesla lowered the base price of the Model 3 to less than 300,000 yuan, and there was no deterrent effect on sales.

The researcher predicted that subsidies will naturally decrease when the production cost and selling price of electric vehicles fall. However, as the timing of the decline in EV prices is delayed than expected, the subsidy effect is expected to continue in the market for the time being.

“As the price of minerals required for the production of electric vehicles, including batteries, rises due to changes in the global supply chain, there is a possibility that the price equalization of electric vehicles and internal combustion engine vehicles will be delayed from 2025,” said Ho-jung Lee, senior researcher at the Korea Automobile Research Institute. In Korea, it is necessary to continuously seek out reasonable policies that can increase the real profit of electric vehicle subsidies, and in particular, policies that promote technological innovation of electric vehicle-related companies are necessary.” He added, “It is necessary to refer to the example of China’s policy that pursued innovation in the electric vehicle and battery industries at the same time while specifying various technological requirements such as the energy density of electric vehicle batteries.”


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