Electric vehicle subsidies increased... but are taxpayers helping Tesla? Reasons for the criticism

Although the budget for electric vehicle subsidies next year is set to increase significantly, concerns are rising that the benefits will go to the American company Tesla. Critics argue that as the government accelerates the expansion of electric vehicle adoption without properly equipping measures to counter foreign brands, it continues a situation where "taxpayers are helping American companies."

According to relevant ministries on the 2nd, the government plans to raise the budget for electric vehicle subsidies from 1.6114 trillion won this year to 2.1403 trillion won next year, an increase of 32.8%. Through this, the number of electric vehicles eligible for subsidies will increase from 300,000 units this year to 430,000 units next year. Additionally, the government plans to expand the scope of transition support payments provided when disposing of internal combustion engine vehicles and purchasing electric vehicles to include commercial vehicles such as taxis.

Regarding the reason for significantly expanding the budget for electric vehicle subsidies, the government stated, "This was done considering the recent surge in demand." In fact, the share of newly registered domestic vehicles that are electric vehicles rose from 11.1% in the first half of last year to 23.3% in the first half of this year, an increase of 12.2 percentage points (p).

The problem is that Tesla is leading the "surge in demand for electric vehicles," intensifying the phenomenon where subsidy benefits are concentrated on one company. According to the Korea Automotive Mobility Industry Association (KAMA), cumulative new registrations of domestic electric vehicles from January to July this year reached 237,032 units, a 103.3% increase compared to the same period last year. Looking only at new Tesla vehicle registrations during the same period (based on data from the Korea Motor Trade Association), the number surged by 150%, from 26,569 units to 66,376 units, far exceeding the overall growth rate of electric vehicles. This indicates that Tesla is driving the spread of electric vehicle adoption in Korea. The industry expects Tesla's new car sales in Korea this year to exceed 100,000 units for the first time annually.

If we calculate the share of Tesla vehicles among newly registered domestic electric vehicles from January to July this year, it reaches 28%. Since subsidy amounts vary by electric vehicle model for each automaker, it is difficult to determine the exact scale; however, it can be estimated that a significant portion of this year's subsidy budget will go to Tesla. Considering that Tesla vehicles are becoming increasingly popular in Korea, it appears that the benefits this company receives from the increased subsidy budget next year will be even greater.

Until now, the industry has argued that considering automobiles as a national strategic industry, the subsidy system should be improved to protect domestic brands. The government also comprehensively considered these voices and established new evaluation criteria for electric vehicle adoption project operators in May. As evaluation items, it presented five areas: △R&D capability (10 points) △Supply chain contribution (40 points) △Response to environmental policies (15 points) △Post-management and sustainability (20 points) △Safety management (15 points), leading to expectations that Tesla and Chinese brands, which have relatively low scores in "supply chain contribution," the item with the highest weighting, would not be selected. However, when the government announced the project operators at the end of June, Tesla remained included while China's BYD was dropped.

An industry official pointed out, "There were many predictions that Tesla would be dropped because it has no domestic manufacturing plants and contributes relatively little to employment, so it would inevitably receive low scores in supply chain contribution, but the result was different from expectations." The official added, "Nevertheless, the government is not properly explaining the reasons for these evaluation results." In fact, the government stated that according to the Act on Public Disclosure of Information by Public Institutions, the evaluation scores of each automaker are "information recognized as likely to significantly harm the legitimate interests of corporations or other entities if disclosed because they concern business secrets such as management and operations," so related content cannot be disclosed.

The industry is raising voices questioning whether the government is focusing too much on the goal of "expanding electric vehicle adoption" while being relatively negligent in protecting domestic brands. Previously, the government set a goal to introduce a total of 4.2 million electric vehicles by 2030. Considering that the cumulative number of electric vehicles introduced domestically so far is around 1 million units, it would be possible to achieve this target only if 700,000 to 800,000 units are sold annually starting next year. Another official said, "It is regrettable that the government seems to be focusing more on achieving an unrealistic adoption target than protecting and supporting the domestic automotive industry."