The South Korean government has announced a wide range of financing and support for its automobile industry, while raising its electric vehicle (EV) subsidies budget and disclosing plans for a trade-in scheme to spur EV purchases.
Over 15 trillion South Korean won ($10.31bn) of policy financing will be earmarked by the country for its car and auto parts makers in 2026, said the country's trade and industry ministry (Motie) on 14 November. It comes as intensifying competition in artificial intelligence autonomous driving technology and impacts on the domestic automobile manufacturing base threatens the country's auto sector that is its manufacturing stronghold, Motie said without providing more details, adding to the potential burden from the earlier US-South Korea tariff deal.
The country is looking to maintain a domestic car production of 4mn units/yr while improving the production quality.
The government will also raise its budget for EV subsidies to around W936bn next year, up from an estimated W715bn this year. It is looking to establish a new purchase financing program for electric and hydrogen buses. It also plans to introduce a trade-in subsidy of up to W1mn for new EV buyers who scrap their old cars starting in 2026, in a similar fashion to China's efforts to spur Chinese EV purchases.
"Considering the South Korean government's previous policy trajectory, a gradual reduction in EV subsidies would have been the more expected approach," Beomseok Kim, analyst at South Korean market intelligence firm SNE Research told Argus today.
But the government appears to have determined that stronger stimulus is needed to re-energise domestic demand given a slower pace of electrification than initially projected, Kim added. The package expanding incentives beyond the 2025 levels signals the government's commitment to keep the momentum alive.
South Korea's battery EV domestic sales hit an all-time-high earlier in September, riding on its current eco-friendly vehicle domestic sales uptrend.
The South Korean government is expecting an accelerated eco-friendly vehicle adoption trend and it is planning ahead by supporting internal combustion engine (ICE) car parts makers' transition. Financial and R&D support will be focused on its industrial green transformation strategy, while designating 200 "future vehicle specialised companies" by 2030 and having 70pc of its ICE parts companies transition to future vehicles parts firms.
The country is eyeing mass production of autonomous vehicles by 2028, with institutional improvements supporting the ambition to be potentially achieved by the end of 2026.
South Korean conglomerate Hyundai Motor earlier in October unveiled its goal of turning India into an export hub through a planned Indian investment of $5.1bn through to 2030.
