South Korea to extend tax breaks for EV buyers

South Korea's government plans to extend a tax break on purchases of electric vehicles (EVs) scheduled to expire at the end of this year, signalling continuing demand growth for battery materials.

South Korean finance minister Hong Nam-ki said the government is looking at ways to give "maximum support" to spur auto industry investment. These efforts will likely include continuing to exempt EVs and hydrogen fuel-cell electric vehicles (FCEV) from a 5pc excise tax beyond this year, saving buyers as much as 4mn won ($3,449) on each purchase.

The tax waiver is in addition to an EV subsidy programme, which Seoul expanded to 42,000 units this year from the 2018 cap of 26,500, as well as liquidity support and loan guarantees that the government provides to automotive parts producers. The purchase subsidies average newly W10.9mn. The finance ministry also has extended a temporary reduction in consumption taxes for all vehicles from the end of this month to year's end to help spur the country's slumping economy.

South Korea also aims to help ease an air pollution crisis by putting more zero-emissions cars on the roads. The government aims to increase South Korea's EV and FCEV output to 10pc of total production in 2022 from around 1.5pc currently. Meeting the target would mean increasing the number of EVs in the country to 430,000 from 56,000 at the end of last year.

Domestic EV sales rose by 37pc from 2018's pace during January-May to 22,142 units. South Korea's EV exports are rising faster, including a 243pc surge from the previous year in April to 5,017 units.