[Exclusive] "Government Subsidies Even If Existing Facilities Are Replaced" GM and Renault Weigh Investment in Korean Electric Vehicles

Government to Provide Cash Support for Foreign-Invested Companies Converting Existing Factories to Electric Vehicle Facilities
Legislative Notice of Amendment to Foreign Investment Promotion Act Enforcement Decree
Korea GM and Renault Korea to Receive Benefits When Converting Existing Factories to Electric Vehicle Lines
Government Incentives to Attract Electric Vehicle Production 'Welcomed'

The government will provide cash subsidies even if foreign-invested companies convert their existing factories into electric vehicle (EV) facilities. Originally, support was limited to investments in new factories, but now subsidies can be received for converting existing production facilities into EV-dedicated lines. As the government increases incentives for switching to EV production lines, attention is focused on whether foreign automobile companies such as Korea GM and Renault Korea will make additional domestic investments.

According to a comprehensive report by Asia Economy on the 25th, the Ministry of Trade, Industry and Energy announced the legislative notice of the "Partial Amendment to the Enforcement Decree of the Foreign Investment Promotion Act" on the 19th.

The main point of the amendment to the enforcement decree is to add cases where existing factory facilities are replaced for conversion to new growth engines or advanced technology businesses to the scope of government cash support. In other words, foreign companies can receive government subsidies even if they convert existing internal combustion engine vehicle production lines to EV lines. The current enforcement decree only recognizes the establishment of new factories, but now conversion of existing facilities is also recognized as investment. This amendment reflects the government's intention to actively attract domestic EV production by foreign-invested companies.

Additionally, the government added "regional headquarters of global companies" as an industry eligible for designation as a foreign investment zone in the amendment. If designated as a foreign investment zone, factory and office land can be leased at low cost. This means active support for attracting global companies' Asia-Pacific regional headquarters to Korea.

Furthermore, reflecting the fact that it takes considerable time for global companies to execute investments, the government plans to advance the timing of cash subsidy payments and reduce procedural burdens significantly, such as limiting the reporting agency to KOTRA when foreign companies' Korean branches reinvest retained earnings without remitting them to their home countries.

Renault Korea Busan Plant Production Line
Photo by Woo Su-yeon

Foreign-invested companies in the automotive industry, such as Korea GM and Renault Korea, have expressed strong support for the government's decision. These companies are committed to attracting EV production to their domestic factories. They agree that active regulatory relaxation by the government is essential in persuading their global headquarters of the need to attract EV production and invest in facilities in Korea.

Renault Korea's Busan plant is fiercely competing with its U.S. and European plants to secure production of mid-size EVs scheduled to start in 2026. Renault Korea plans to utilize existing factories to build EV production facilities rather than constructing new plants. Large-scale investment from the headquarters is necessary to transform existing facilities into EV production lines.

Korea GM Bupyeong Plant Production Line
Photo by Korea GM

Korea GM's Changwon and Bupyeong plants have not yet finalized plans for EV production allocation. Korea GM returned to profitability last year for the first time in nine years, thanks to strong exports of the small sport utility vehicle (SUV) Trailblazer (including the Buick Encore GX). However, without securing additional new EV models, it is uncertain whether this positive performance trend will continue. To request EV allocation from headquarters, high productivity and strong government incentives for attracting foreign investment must be supported.

An official from a foreign-invested company said, "While the Korean government has been among the global top tier in semiconductor and IT sectors, there has been a regretful lack of enthusiasm in fostering the future car sector. From the perspective of global headquarters, even the government's legal amendments send a strong signal of active industrial promotion."

Another foreign-invested company official emphasized, "Legal amendments take considerable time, and above all, strong government will is crucial. Going forward, the broad purpose of laws should be established by legislation, and detailed matters should be set by enforcement decrees so that domestic laws can keep pace with the speed of industrial changes."

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