Eco-friendly Cars in High Demand, Driven by Climate Change and Subsidies

Ioniq 5, EV6, and Others Won't Be Delivered Until Next Year Even If Contracted Now
Global Auto Industry's Fierce Competition in Eco-Friendly Vehicles

[Asia Economy Reporter Changhwan Lee] The rapid increase in eco-friendly vehicle sales in the domestic automobile market is due to growing interest in environmental protection amid climate change. In addition, the government's strong eco-friendly vehicle subsidy policies, new model launches by manufacturers, and superior fuel efficiency compared to internal combustion engine vehicles have also played a role.

The Eco-Friendly Vehicle Boom Sparked by the Climate Crisis

According to the automotive industry on the 6th, major countries around the world have been rushing to announce bans on internal combustion engine vehicle sales to respond to climate change. The European Union (EU) was the fastest to ban internal combustion engine vehicle sales starting in 2035, and the United States plans to electrify 50% of new cars from 2030. China is also expected to stop selling internal combustion engine vehicles around 2040.

South Korea is also moving up the timeline for stopping internal combustion engine vehicle sales. Hyundai Motor Group plans to stop selling internal combustion engine vehicles domestically from 2040 and to halt sales worldwide by 2045.

The government's subsidy policies to increase eco-friendly vehicle sales are also a major reason for the rise in purchases. This year, the government allocated 1.023 trillion won for electric vehicle support, which is about a 25% increase from last year's 817.4 billion won.

Genesis's first dedicated electric vehicle 'GV60' / Photo by Mun Honam munonam@

According to the National Assembly Budget Office, the total budget invested since the government began supporting electric vehicle distribution in 2011 has reached 3.7933 trillion won. Since consumers can generally receive more than 10 million won in support including local government subsidies when purchasing an electric vehicle, it is analyzed that this stimulates consumer purchasing sentiment.

In line with social trends, automakers are also releasing eco-friendly vehicles equipped with advanced technology one after another. Hyundai Motor Group plans to invest more than 60 trillion won in eco-friendly vehicle development by 2025 and launch more than 44 eco-friendly electrified models. Hyundai’s luxury brand Genesis will release all new models as electric or hydrogen vehicles starting in 2025.

American General Motors (GM) will also launch 30 electric vehicle models worldwide by 2025 and stop producing internal combustion engine vehicles from 2035. German automaker Mercedes-Benz announced it will release all models as electric vehicles starting in 2030.

Semiconductor Parts Supply Shortage as a Variable

Despite eco-friendly vehicles becoming mainstream, many challenges remain to be overcome. First and foremost is overcoming the shortage of parts including semiconductors. The shortage of automotive semiconductors is causing difficulties in electric vehicle production as well.

As COVID-19 resurges in Southeast Asia, where automotive semiconductor factories are concentrated, semiconductor production lines have stopped operating, making it difficult to supply semiconductors necessary for vehicle production such as Engine Control Units (ECU) and front and rear camera modules.

Hyundai and Kia experienced production halts last month due to semiconductor shortages at various domestic and overseas plants including Asan, Ulsan Plant 4, Alabama Plant (Hyundai), and Georgia Plant (Kia).

Hyundai Ioniq 5

As a result, vehicle delivery delays have worsened. Hyundai and Kia’s representative electric vehicles, Ioniq 5 and EV6, can only be received next year even if ordered now. Other eco-friendly models such as Kona Hybrid and Sorento Hybrid also require waiting more than six months to receive the vehicle.

The problem is that the parts shortage is expected to continue until next year. Global market research firm IHS forecasts that the automotive semiconductor shortage will persist through the fourth quarter of this year and beyond next year. KB Securities researcher Seongjin Kang analyzed, "The semiconductor shortage problem is worsening due to the resurgence of COVID-19 in Southeast Asia," adding, "It is unlikely that the situation will be resolved within this year."

Relatively high prices are also an obstacle to popularization. Major electric vehicles sold domestically are priced above 50 million won. It is pointed out that without government subsidies, the purchase incentive significantly decreases. Since the government’s subsidy policy will inevitably disappear in the long term, lowering vehicle prices remains a challenge for automakers.

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