Threshold for high-priced cars must be determined reasonably
State subsidies for high-priced electric vehicles (EV) are expected to end next year. The policy change is meant to raise the efficiency of budget execution, considering that hundreds of billions of won in taxpayer money is spent on subsidies every year.
The Ministry of Environment is reportedly in the process of drawing up a policy package focusing on the exclusion of high-priced EVs from those subject to state subsidies. Specifically, the ministry will begin considering car prices next year in determining vehicles eligible for subsidies in a major about-face from merely taking into account performance such as driving efficiency at present. In this process, there have been disputes as to whether it's right to subsidize users of cars costing over 100 million won ($83,000).
The environment ministry is preparing standards for high-priced vehicles by collecting feedback from the automobile industry. The threshold for high-priced cars is likely to be set at 60 million won or 70 million won. If this plan is realized, such luxury models as the Tesla Model S and Mercedes Benz EQC will be ineligible for subsidies.
Outside of Korea, deciding whether or not to grant subsidies according to car prices is not a new concept. Subsidies are now available only to vehicles costing less than 300,000 yuan in China, 60,000 euros in Germany and $60,000 in the United States. Furthermore, as the electric vehicle market has expanded in recent years, prices of electric vehicles have fallen on average. Consumers also have more options as far as EV models are concerned. So the environment ministry has every reason to devise detailed standards for subsidies.
Subsidies are primarily aimed at expanding the use of eco-friendly cars in an ultimate bid to cut pollution. The environment ministry's new EV subsidy scheme will certainly contribute to shoring up the competitiveness of Korea's homegrown automobile industry. The question is whether the ministry can determine the threshold for high-priced cars fairly and reasonably through negotiations with automakers.