South Korea May Change EV Subsidy Rules To Accommodate Tesla, etc.

As Tesla prepares to open its first South Korean store early next year, policymakers may toss out a subsidy rule blocking incentives to electric vehicles that take longer to charge and that deliver longer range.

Buyers of electric vehicles in that market can receive up to 22 million won ($18,328) for EVs that can fully charge in under 10 hours using the country’s standard electricity supply and outlets. Pricier models with longer range, and that need more charging time, such as Teslas with 90 and 100 kWh batteries and the BYD e6, don’t qualify.

Tesla Motors, is thus poised to benefit if incentives show up for its larger battery Model S and Model X. Demand is strong for the upcoming Model 3 in South Korea, but Tesla will soon be opening up its first store there at the Starfield shopping center near Seoul. Tesla will be selling its existing lineup a year before the Model 3 shows up at the store.

BYD, which leads the market next door in China and in global plug-in electrified vehicle sales, had planned to enter the South Korean market earlier this year. The Chinese company delayed that decision due its e6 being ineligible for the subsidy, according to a person familiar with the matter.

Minister of Environment Cho Kyeung-kyu in October said the 10-hour rule was introduced in 2012 to reduce the inconvenience of long charging times. EVs have been changing, with the advent of long-range models fast approaching.

One ministry official told Reuters that a consultancy will be submitting a proposal to revise the rule by June of next year, thought it could be earlier.

“We haven’t decided whether to keep the rule alive, or kill it, or come up with complementary rules,” the official said.

Opposition lawmaker Lee Sang-don recently called the rule an “unreasonable non-tariff barrier” that takes away consumer incentives to buy long-range EVs.

“The rule is meaningless,” Kim Pil-soo, president of the Korean Electric Vehicle Association, told Reuters. “We have kept telling the government they should remove it.”

Japan’s Nissan Motor Co. has seen better results in the market selling its Leaf all-electric car. Korean automaker Hyundai Motor Co. just released its first mass-produced EV, the Ioniq, this year.

The current Ioniq only takes four hours and 25 minutes for a full charge. In 2018, an Ioniq with a larger-capacity battery will be released, which may miss out on the government incentive unless it’s revised.

SEE ALSO:  Tesla Competing with Hyundai As It Enters South Korea Market

South Korea has been an attractive market for Tesla. While the country ranks 11th worldwide in total vehicle sales, it’s been the fifth best market for luxury cars like the Mercedes-Benz S-Class and BMW’s 7 series, the German automakers said. Being price competitive with a revised subsidy could help Tesla in that market.

Tesla has been taking Korean orders since August for its Model S, Model X, and Model 3.

Setting up Supercharger stations could help Tesla. The company plans to install a few of its fast-charger stations in Seoul, Busan, and Pyeongchang. Charging time will be reduced to minutes instead of hours, Tesla said.

The South Korean government would like to see that happen. It has plans to increase its 750 fast chargers to 2,000 next year and 3,000 by 2020.

Reuters


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