Countries' 'Eco-friendly Vehicle Support' Stimulus Plans... COVID-19 Accelerates Eco-friendly Vehicle Popularization

[Asia Economy Reporter Kiho Sung] The automotive industry, which struggled this year due to the novel coronavirus infection (COVID-19), is expected to recover next year. The key factors are the base effect from demand contraction caused by COVID-19 and aggressive eco-friendly vehicle policies by countries worldwide targeting this. Consequently, there are calls for Korea to implement more systematic and proactive eco-friendly vehicle policies.

According to the Korea Institute for Industrial Economics and Trade's "2021 Economic and Industrial Outlook" released on the 10th, Korea's automobile exports, which decreased by 14% last year, are expected to increase by 31.4% in the first half of this year. This momentum is anticipated to drive a 15.2% growth for the entire year. Especially, with eco-friendliness emerging as a trend, market restructuring centered on eco-friendly vehicles is expected to accelerate. Hyundai Motor Securities forecasted global electric vehicle demand this year at 6.22 million units, driven by major countries' environmental regulations and expanded subsidies.

A variable is that competing countries are accelerating support and policies aiming for carbon neutrality by 2050. Germany is increasing its existing government subsidy from 3,000 euros to 6,000 euros by the end of this year. Including existing subsidies for completed car manufacturers, benefits can reach up to 9,000 euros. The exemption period for pure electric vehicle automobile tax has been extended until 2030.

China has mandated the proportion of eco-friendly vehicle production by domestic automakers through the credit (double points) system since 2019. The ratio was 10% in 2019, 12% in 2020, and is set to increase by 2 percentage points annually until 2023.

Alongside this, laws banning the sale of new internal combustion engine vehicles are being passed consecutively. Norway plans to ban sales from 2025, Denmark and Sweden from 2030, and France from 2040. In the United States, California, the largest automobile market in the country, has declared a complete ban starting in 2035.

The Korean government also plans to supply an additional 100,000 electric vehicles this year and set a cumulative target of 1.13 million electric vehicles by 2025. However, systematic policy design is crucial to achieving this. For example, according to the Korea Automobile Manufacturers Association, Tesla took 43.3% of passenger car subsidies in the first half of last year, and Chinese buses received 34.9% of electric bus subsidies. This means government support funds are aiding foreign companies.

Systematic research and development (R&D) is also urgent. According to the National Assembly Budget Office, regarding patents related to electric vehicle powertrains, Europe had 90 cases and Korea 224 cases until 2016. However, by 2019, Europe had 589 cases while Korea had 370 cases, reversing the situation.

Huh Gah-hyung, an economic analyst at the National Assembly Budget Office, explained, "With policy support from major countries, eco-friendly vehicles such as electric and hydrogen cars are expected to become rapidly growing sectors worldwide, so securing markets and technologies is necessary," adding, "As internal combustion engines are gradually pushed out of the market, mid- to long-term measures are needed for restructuring related parts suppliers and industrial transformation."

This content was produced with the assistance of AI translation services.