"Electric Vehicle Subsidies Can Be Used as a Stepping Stone for New Industry Development"

[Asia Economy Reporter Yoo Hyun-seok] As electric vehicle subsidy policies can serve as a stepping stone for fostering new industries, there is a call for policies that can enhance their practical benefits.

Lee Ho-jung, Senior Researcher at the Research Strategy Headquarters of the Korea Automotive Technology Institute, stated in an industry trend report titled "Electric Vehicle Subsidy Policies: Focusing on Hidden Practical Benefits" on the 21st, "Electric vehicle subsidy policies hold substantial ‘practical benefits’ beyond environmental value, stemming from the early capture of new industries."

He explained that while the World Trade Organization (WTO) and inter-country Free Trade Agreements (FTAs) prohibit explicit discrimination against products from specific countries, subsidy methods that consider the characteristics of domestic products can create 'invisible barriers.' The researcher noted, "There is ample likelihood that countries will use electric vehicle subsidies as tools to foster domestic new industries," adding, "In fact, major countries frequently pursue their own practical benefits through electric vehicle subsidies."

Among countries, some operate subsidy policies favorable to their technological characteristics, citing China and Japan. For vehicles equipped with battery swapping service technology promoted by the Chinese government, subsidies are provided even if the vehicle price exceeds 300,000 yuan (approximately 56.62 million KRW), which is the usual subsidy eligibility threshold. In Japan’s case, based on the fact that electric vehicles can supply emergency power during disasters, additional subsidies are granted for electric vehicles equipped with external charging functions, thereby favoring domestically produced electric vehicles.

Additionally, the timing of subsidy payments can be set advantageously for domestic electric vehicles. Italy has been flexibly operating subsidies by adding a special subsidy of up to 2,000 euros (approximately 2.72 million KRW) per electric vehicle since last year, when sales of the domestic electric vehicle Fiat’s 'New 500 Electric' began in earnest. Germany also increased subsidies to a maximum of 9,000 euros (12.22 million KRW) per electric vehicle and extended the payment deadline to 2025 starting in 2020, when the domestic Volkswagen electric vehicle ID. series was launched.

The researcher emphasized the need to seek reasonable ways to pursue practical benefits as subsidies are expected to remain effective in the electric vehicle market for the time being. He said, "If production costs and sales prices of electric vehicles sufficiently decrease, the need for subsidies will diminish, but since price reductions are delayed more than expected, subsidy effects are expected to continue in the market for the time being," adding, "Domestically, reasonable policies to enhance the practical benefits of electric vehicle subsidies should be continuously explored, especially policies that promote technological innovation among electric vehicle-related companies are necessary."

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