"Introducing Domestic Production Incentive Tax System... A Matter of Survival for Korea's Automotive Industry"

"Future Automobile Industry Development Strategy Forum"

Kim Sungjun, CEO of Golden Oak Tax Corporation
"Production Incentive Tax System Should Be Applied to Domestic Automakers"
"Necessary for Achieving NDC Targets... Also Increases Tax Revenue"

Guemin Jung, President of the Korean Mobility Society
"Production Incentive Tax System Is for the Survival of the Automotive Parts Sector"
"Domestic Brands Could Be Reduced to Mere Shells"

As the China-centered electric and autonomous vehicle ecosystem continues to spread worldwide, experts have diagnosed that implementing a domestic production incentive tax system is essential for the survival of Korea's automotive industry ecosystem.

The domestic production incentive tax system is referred to as the "Korean version of the Inflation Reduction Act (IRA)." It is a system that provides tax deductions proportional to the costs companies incur to produce goods domestically. This was one of President Lee Jaemyung’s campaign pledges during his candidacy.

On May 8, the Korean Mobility Society and the Korea Automobile Mobility Industry Association jointly held the "Future Automobile Industry Development Strategy Forum." The forum was convened to present key trends from the "2026 Beijing Motor Show," which was held in Beijing, China last month, and to explore policy directions to strengthen the competitiveness of Korea’s electric vehicle industry.

On the 8th, Kim Sungjun, CEO of Golden Oak Tax Corporation, is presenting at the 'Future Car Industry Development Strategy Forum.' KAMA

During the forum, Kim Sungjun, CEO of Golden Oak Tax Corporation, delivered a presentation on "Policy Directions for Strengthening the Competitiveness of the Electric Vehicle Industry." He argued for the introduction of the domestic production incentive tax system, stating, "Korea needs support not only for investment but also for production that can increase utilization rates."

Kim explained, "While the production capacity index of Korean manufacturing continues to rise steadily, the utilization rate index has declined significantly since the financial crisis," adding, "There is a need for additional policies to incentivize production."

In particular, Kim emphasized the necessity of directly applying the domestic production incentive tax system to domestic automakers such as Hyundai Motor and Kia.

He stated, "There are doubts about whether applying the domestic production incentive tax system to domestic auto parts suppliers would actually increase production," and pointed out, "Domestic demand is determined by the production limits of automakers, so if domestic automobile production is restricted, increases in parts production will also be limited."

He further explained, "As we have seen with parts suppliers following Hyundai Motor and Kia when they build factories overseas, granting the domestic production incentive tax system to automakers is necessary to ensure job security for approximately 250,000 people employed in the parts industry."

Kim also analyzed that the domestic production incentive tax system would be effective in achieving the national greenhouse gas reduction target (NDC). Korea aims to increase the number of zero-emission vehicles to 4.5 million by 2030. However, by the end of this year, the expected number of registered zero-emission vehicles is 1.17 million, making it difficult to reach the 2030 target at the current pace.

Regarding this, Kim said, "Buyers do not make purchases without subsidies, so the sales volume of zero-emission vehicles is essentially determined by the purchase subsidy budget, making it difficult to achieve a dramatic increase in sales." He added, "To achieve the NDC target, additional support through measures like the production incentive tax system, alongside subsidies, is necessary."

There is also analysis that the domestic production incentive tax system, which requires national budget allocation, would lead to a greater increase in tax revenue than tax credits. According to research by Professor Jeon Byungwook of the University of Seoul, if a KRW 5 million tax credit is applied per electric vehicle, tax revenue is expected to increase by KRW 278 billion in 2027.

Kim added, "If the domestic production incentive tax system is introduced, it will induce production in other industries as well, increasing tax revenue," and stated, "It is expected to create more than 130,000 jobs over three years."

On the 8th, Jeong Gumin, President of the Korean Mobility Society, is making a presentation at the 'Future Car Industry Development Strategy Forum.' KAMA

Guemin Jung, President of the Korean Mobility Society (Professor at Kookmin University), who also presented at the forum, emphasized the need to introduce the domestic production incentive tax system.

Jung stated, "Looking at the recent automotive industry, global brands are using cheap Chinese parts to lower prices, leaving only the brand shell," and explained, "The domestic production incentive tax system is not for large domestic corporations alone, but for the survival of the entire domestic automotive parts ecosystem."

He added, "Last year, a Chinese parts supplier revealed intentions to incorporate its technology into overseas vehicles. As this cost-competitive technology expands worldwide, if competing parts suppliers disappear from the market, prices will inevitably rise."

Jung further stressed, "The domestic production incentive tax system is one of the best cards our companies can use without external friction. If we are not careful, domestic brands could be reduced to mere shells filled with Chinese parts, so government-level support is extremely important."

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