Government launches various initiatives to push sales of electrified vehicles
After many years of underinvestment, South Korea is now catching up with major Asian countries such as Japan and China in pushing sales of low or zero-emission vehicles such as hybrids, plug-in hybrids, battery electrics and hydrogen fuel cell vehicles. In the past few months, the South Korean government has taken several initiatives that are expected to increase penetration of alternative powertrain vehicles in the country in coming years. The initiatives vary from encouraging new vehicle buyers to opt for alternate energy vehicles in place of gasoline or diesel vehicles to introducing schemes to scrap old diesel vehicles. In its latest move, the government has intensified its focus on expanding the network of charging points vital for wider adoption of such vehicles.
In December 2015, South Korea disclosed a green car plan which aims to rapidly expand alternative energy vehicles over the next five years. The Korean government aims to have such vehicles account for around 20% of annual vehicle sales by 2020. In order to meet this goal, the Korean government has decided to invest KRW150 billion (USD127 million) into research and development (R&D) of globally competitive eco-friendly vehicles.
More recently in July, the South Korean government announced plans to invest spend KRW3.94 trillion (USD3.41 billion) in an ambitious green car plan. Of this earmarked amount, the government will invest KRW3 trillion (USD2.6 billion) on promoting sales of eco-friendly cars by offering a subsidy on the purchase of such vehicles, KRW760 billion (USD660 million) on building charging infrastructure, and the remaining KRW180 billion on scrapping old diesel cars. The government plans to offer a 70% tax cut to people scrapping old diesel cars and buying a new one.
Of the KRW760 billion earmarked for charging infrastructure, the Korean government will invest KRW200 billion (USD180 million) this year to establish 150 public charging stations to install 300 super chargers in Seoul, Jeju Island and other parts of the country by the end of this year. The government will also install about 30,000 regular chargers at apartment complexes across the country. South Korea is transforming its unused telephone booths into EV charging stations to rapidly expand the EV charging network. The government also reduced EV charging fee at public super charging stations by half to KRW 60,000 (USD53.9).
Any effort by the South Korean government to push sales of electrified vehicles needs support from the country’s automotive industry, especially from automakers and suppliers. Leading Korean automakers Hyundai and Kia, which jointly accounted for more than two-third of the domestic sales in 2015, has recently intensified its focus on new energy vehicles. The Korean automotive group is planning to offer as many as 28 electrified vehicles across Hyundai, Kia and Genesis brands by 2020. Earlier this year, the company introduced its first dedicated brand for electrified vehicles called Ioniq, like Toyota did many years ago for its Prius brand. Hyundai will offer Ioniq in pure-electric, plug-in hybrid and hybrid versions. Hyundai is currently working on a pure electric SUV, which is scheduled to be launched in 2018.
Hyundai’s sister brand Kia has been selling Soul EV in South Korea since May 2014. Early this year, Soul EV’s cumulative sales crossed 10,000 units. This year Kia started selling Niro Hybrid, the Korean automaker is expecting to sell 65,000 units of the hybrids globally this year. Kia is set to further expand its portfolio through launch of K5 plug-in hybrid sedan this month in South Korea.
South Korea is home to some of the leading suppliers of batteries, a key component used in hybrid and electric vehicles. South Korean suppliers such as Samsung SDI, LG Chem and SK Innovation are investing in key markets to meet growing demand for lithium-ion batteries. These suppliers are expected to play a vital role in the emergence of South Korea as a key base for producing hybrid and electric vehicles in coming years.
Though South Korea might not have been as active as some other countries in Asia as well as in Europe and America in creating the market environment for wide adoption of EVs, things are changing now with the government now taking a more holistic approach to support the industry’s growth.
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