'Non-recyclable but eco-friendly subsidies, double support for serving robots'... Only Chinese products benefit

Is South Korea's Subsidy Policy Okay as It Is?
'Eco-friendly Policy' Electric Vehicle Subsidies
Indirect Support for Non-recyclable LFP Batteries

China Directly Subsidizes Domestic Companies
Fostering Advanced Industries like Drones and Robots

Another Round of Purchase Subsidies in Korea
Domestic Products Competing on a 'Tilted Playing Field'
Subsidy Policy Fails to Protect Domestic Industrial Ecosystem

Advanced industrial products made in China are flooding into the domestic market. These products have grown in technological capability and scale, backed by massive subsidies within China. The problem is that these products are again receiving subsidies related to eco-friendly and advanced industries in Korea.

Moreover, concerns have begun to arise about the contradictions in the logic of providing subsidies to Chinese products. The reason for subsidizing electric vehicles is because they are eco-friendly products. However, the Korean government is providing subsidies for cars using Chinese-made LFP (Lithium Iron Phosphate) batteries, which are non-recyclable and ultimately must be discarded as waste. There is also criticism that the issue of 'double benefits'?where Chinese products, made with subsidies and tax credits in China and then exported, receive subsidies again from the Korean government?needs to be properly addressed.

Electric Vehicles Equipped with Non-Recyclable 'Chinese LFP' Also Receive Subsidies in the 10 Million KRW Range

As of the 20th, there are six electric vehicle models equipped with Chinese-made LFP batteries that have been released or are about to be released domestically. Hyundai Kona Electric, Kia Niro EV, Ray EV (upcoming release), and KG Mobility Torres EVX all use Chinese batteries. Tesla Model Y RWD and Mercedes-Benz EQE also have Chinese batteries installed. Except for the Mercedes-Benz, which is priced above 85 million KRW and thus does not receive subsidies, all others receive domestic electric vehicle subsidies.

The issue is whether LFP batteries are truly suitable for subsidy policies aimed at eco-friendliness and carbon neutrality. Recently, governments worldwide have focused on the eco-friendliness of batteries through the recycling of spent batteries. Efficient recovery of raw materials such as lithium and nickel from used batteries reduces carbon emissions. Higher efficiency reduces environmental destruction and carbon emissions caused by creating new mines or extracting raw materials from high-altitude salt lakes. Ultimately, a 'circular economy' linking battery production → use → collection → recycling → battery reproduction must be possible.

LFP batteries have limited recyclability once they reach the end of their life. Currently, the dominant method is a 'wet process' where spent batteries are crushed into black powder, which is then soaked in acidic substances to extract metals. This technology can only recover lithium from LFP batteries. Iron, phosphate, and graphite cannot be recovered. However, NCM (Nickel-Cobalt-Manganese) batteries allow recovery not only of lithium but also of valuable materials like nickel, cobalt, and manganese. Because of the lower raw material recovery rate, recycling LFP batteries is economically unfeasible.

LFP Batteries That Cannot Be Recycled... Should Environmental Policy Subsidies Be Provided?

The value of recovered metals per kWh varies by battery type: NCM811 (80% nickel content) is $68, NCA (Nickel-Cobalt-Aluminum) is $71, while LFP is only $45 per kWh. When the value is low, companies do not invest in recycling facilities. As a result, in China, LFP spent batteries are not recycled but landfilled, causing serious environmental pollution. Currently, no companies in Korea recycle LFP batteries. This implies a high likelihood that batteries used in electric vehicles will have to be discarded as waste.

Professor Kim Pil-su of Daelim University’s Department of Automotive Engineering said, "In China, LFP spent batteries are landfilled, raising environmental concerns. If LFP spent batteries released domestically are not properly recycled, in a small country like ours, proper burial is not feasible." He added, "Considering disposal costs and environmental pollution, it is necessary to question whether LFP batteries are truly cheaper than NCM batteries."

Major countries are strengthening regulations on spent battery recycling with a focus on eco-friendliness. The European Union (EU) approved a new battery law in June this year, requiring that from 2031, at least 6% of lithium and nickel used in electric vehicle battery production must come from recycled materials.

In Korea, there are calls for regulations such as differentiated subsidies for electric vehicles equipped with LFP batteries, which have lower recycling rates. However, experts caution that although the domestic market is small, the global market is large, so market regulations should be approached carefully.

Chinese Future Industries Receiving 'Double Subsidies' in Korea... Europe Has Declared War

In industries considered next-generation advanced manufacturing sectors such as robots and drones, there are also concerns that Chinese products are receiving double subsidies. Chinese batteries still benefit from tax credits and various local government subsidies within China.

The serving robot industry, which has recently shown remarkable growth, is a prime example. As of the end of last year, there were about 5,000 serving robots domestically, 70% of which are Chinese-made.

Since 2015, China has designated robots as one of its 10 core industries, providing direct subsidies not only to buyers but also to manufacturers. This is the secret behind the growth of Chinese robot companies. Companies located in robot industrial complexes in Beijing, Shanghai, and other cities received a 10% refund on investment funds and subsidies amounting to 20% of their sales. These large Chinese robot companies export serving robots that again receive subsidies domestically in Korea. This is through programs like the Ministry of SMEs and Startups’ 'Smart Store Technology Diffusion Project,' which provides subsidies covering 70% of the supply price to buyers. Although subsidies are not given directly to Chinese manufacturers, structurally, Chinese companies expand their market share and secure future industries through subsidies both domestically and abroad.

The European Union (EU) is wary of such 'double subsidies' and market distortions caused by subsidies and has declared war on subsidy policies of countries outside Europe. The EU enacted the Foreign Subsidies Regulation in January this year and began enforcement in July. This regulation allows the European Commission to prohibit related contract conclusions if market distortion is found. Corrective measures such as subsidy refunds, temporary restrictions on intra-EU activities, bans on specific investments, or asset divestments can also be imposed.

On June 13 (local time), Ursula von der Leyen, President of the European Commission, strongly criticized China’s subsidy policies during her annual policy speech at the European Parliament in Strasbourg, France, stating, "We will investigate Chinese electric vehicle subsidies that distort the European market. Many European companies that have just started have been pushed out by Chinese companies receiving subsidies. Pioneering companies have had to file for bankruptcy, and promising talents have left to find jobs abroad."

There are also calls domestically to consider the total amount of subsidies when providing domestic subsidies for products that have received subsidies abroad. Professor Lee Jeong-hee of Chung-Ang University’s Department of Economics said, "A characteristic of China’s next-generation advanced industry policy is direct subsidies to companies, which is why the domestic industry, geographically closest and with similar industrial characteristics, is being hit hard. We must be cautious not to boost the price competitiveness of Chinese products through domestic subsidy policies, effectively giving them wings."

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