The South Korean government has introduced a new EV policy aimed at supporting domestic automakers Hyundai and Kia while addressing the competitive threat posed by Tesla Inc.’s TSLA Model Y and Chinese juggernaut BYD Co BYDDY BYDDF.
What Happened: The new EV policy, announced on Wednesday, will provide South Korean automakers with a competitive edge in the global EV market, reported Electrek, citing The Korea Herald. The policy is a response to the price reductions of Tesla’s Model Y and models from BYD, which use lower-cost LFP batteries.
Hyundai’s Business Research Center auto group leader, Yang Jin-Soo, noted that the price cuts by Tesla and the rise of BYD have triggered a global price war in the EV market. The revised policy aims to help domestic automakers compete on a level playing field.
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Policy’s Effect: The new plan sets the maximum grant at approximately $4,800 (6.5 million won), which is $225 (300,000 won) less than the previous policy. The vehicle’s range, price, and battery type determine its eligibility. The type of battery has become a key focus of the new policy, with significantly reduced subsidies for EVs with “lower-performance batteries,” such as LFP batteries from China.
The new policy sets a cap at $41,000, down from roughly $43,000 last year. This means that Hyundai’s IONIQ 5 could potentially earn an over $2,800 subsidy gap over the Model Y.
Why It Matters: The new EV policy comes at a time when Tesla’s Model Y has been making waves globally, becoming the first EV to top global car sales. BYD also managed to beat the American company last year as the top seller of BEV vehicles.
Last year, Tesla introduced its more affordable Model Y with an LFP battery, leading to a massive sales boost in South Korea. Priced $16,000 lower than other variants, Tesla’s sales reportedly surged by nearly 876% in September alone, capturing about 10% of Korea’s entire EV market within four months.
Hyundai, on the other hand, has been emerging as a strong contender in the EV market, with its Ioniq 5 leading the company’s sales. The new policy could potentially strengthen Hyundai’s position in the market, further challenging Tesla’s dominance.
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