Seoul plans EV, hydrogen car push to boost industry

South Korea's government aims to spur massive growth in the country's use of electric vehicles (EVs) and hydrogen cars to help its auto parts industry become dominant participants in supplying components as other fleets are eventually replaced by zero emissions models.

Plans call for boosting South Korean production of EVs and hydrogen cars to 10pc of the industry's global output in 2022 from 1.5pc currently, the country's ministry of trade, industry and energy (Motie) said.

Meeting that goal will put South Korea's output of zero emissions vehicles at about double the projected global rate, while increasing the number of EVs on the country's roads to 430,000 from 56,000. The number of hydrogen vehicles is targeted to rise to 65,000 from less than 1,000 in the same timeframe. Seoul previously set a goal of having 250,000 EVs on the nation's roads by 2020.

The initiative will increase South Korea's domestic-driven demand for EV battery materials by about sixfold. The government also aims to boost the country's annual exports of EVs to 250,000 in 2022 from about 36,000 currently, while hydrogen car shipments will rise to an estimated 5,000 from 300.

Demand for transportation fuels will be reduced by around 2pc because EVs and hydrogen vehicles will account for about 2.3pc of South Korea's total fleet, up from less than 0.3pc currently. The country's refiners already face stagnant or falling demand for fuels in a mature domestic market. South Korean diesel and gasoline demand averaged a combined 667,000 b/d during January-October, down by 1.3pc from 2017's pace, according to data from state-run oil company KNOC.

Motie said the zero emissions vehicle policies will have environmental benefits, including reducing fine dust emissions by 829 t/yr, but the effort is largely an economic strategy. By creating greater economies of scale for producers of EVs and hydrogen car components, the government aims to help parts producers gain competitive advantages as global leaders in technology and cost effectiveness.

Industry advances and higher production volumes also will drive down EV and hydrogen vehicle prices, allowing the government to phase out generous purchase incentives, Motie said. Seoul sees domestic prices of EVs dropping to an average of 40mn won ($35,417) from W50mn by 2022, while hydrogen car prices will drop to an estimated W50mn from W70mn.

To accelerate growth in sales volumes, South Korea's government plans to speed the build-out of charging stations and hydrogen fuelling outlets. Purchase subsidies will be enhanced, while by 2020 all vehicles bought for government fleets will have to be EVs or hydrogen models, except in cases where no such option is available.