Domestic automakers are striving to boost profitability by expanding sales of high-value-added HEV models, but demand has fallen short of expectations. Amid this, the government decided to end the individual consumption tax exemption for HEVs at the end of this year, heightening concerns across the industry.
According to data compiled by the Korea Automotive and Mobility Industry Association (KAMA) on the 10th, new HEV registrations in the first half of this year totaled 289,814 units, a 0.9% decline compared to the same period last year (292,565 units). This contrasts sharply with the 113.6% surge in electric vehicle (BEV) sales, which rose from 92,933 units to 198,509 units during the same period.
Annual domestic HEV sales have shown a recent upward trend: 398,908 units in 2023, 512,003 units in 2024, and 587,079 units last year. However, with sales momentum slowing this year, projections suggest that surpassing the annual target of 600,000 units may be delayed. Considering that domestic and foreign automakers aggressively expanded HEV sales in the first half of the year and that high oil prices driven by the Middle East conflict boosted HEV popularity, these results are seen as disappointing.
The industry is highly sensitive to HEV sales performance because their prices are approximately 10% higher than those of internal combustion engine vehicles, making them more profitable for securing margins. Moreover, unlike electric vehicles, major Chinese brands have not yet fully entered the Korean market in the HEV segment, allowing domestic automakers to maintain a significant competitive advantage.
However, with major domestic and international brands recently launching or planning to launch various new models, HEV sales are not gaining the expected momentum, deepening concerns within the industry. For instance, Hyundai Motor recently launched a new Avante model featuring both gasoline and HEV powertrains. Genesis plans to release its first HEV models (G80 and GV80) within this year. KG Mobility (KGM) will introduce the mid-size SUV 'SE-10' in early next year as both a gasoline and PHEV (plug-in HYBE-led) model, in collaboration with China's Chery Automobile.
Especially, there are criticisms that the government's decision to cut off support for HEVs has poured cold water on an already sluggish atmosphere. The Ministry of Economy and Finance recently announced in its tax reform plan that it will eliminate the HEV individual consumption tax exemption of 700,000 won (approximately 1 million won including education tax and value-added tax) by the end of this year. This policy was initially introduced to promote widespread adoption during the early stages of HEV introduction, but is now being phased out on the grounds that its policy objectives have been achieved. Since the HEV consumption tax exemption is based on the 'delivery date' rather than the 'contract date', popular models with long waiting periods were effectively excluded from the benefit even before the official cutoff.
The automotive industry has urged the government to maintain policy support, warning that a slowdown in HEV sales would severely impact not only domestic automakers but also mid-sized and small parts suppliers. KAMA also stated in a recent report: "If HEV support measures are terminated during the transitional phase toward full electrification, it could exacerbate financial difficulties for domestic mid-sized companies undergoing structural improvements and increase the financial burden on their lower-tier suppliers, potentially eroding the momentum needed to transition to electric vehicles."
in INDUSTRY
