Korean importers of Chinese electric buses frustrated by subsidy cut

The Ministry of Environment has decided to reduce subsidies for the purchases of electric vehicles (EVs) that use batteries with lower energy density, thwarting the attempt by Korean importers of Chinese electric buses to stop the move.

In contrast, the ministry accepted the request from Korean importers of cars made in the U.S., Europe and Japan to continue to offer subsidies for the purchases of EVs made by carmakers having outsourced service centers here.

On Thursday, the environment ministry said it will reform rules on subsidies for the purchase of EVs, in order to focus on supporting safer and better-performing cars. The new rules will be finalized on Feb. 9.

The announcement came about a month after the government unexpectedly postponed its plan to announce the reformed rules, after facing a backlash from EV importers.

“We expect the new rules to contribute to enhancing technological competitiveness, as well as reducing emissions of pollutants and greenhouse gases,” an environment ministry official said.

According to the new policy, subsidies will be cut by 30 percent for the purchases of electric buses, if the buses use LFP (lithium ferro-phosphate) batteries whose energy densities are lower than 400 kilowatts per liter. Most Chinese electric buses operating here are using those batteries, which have lower energy density compared to NCM (nickel, cobalt and manganese) batteries used in Korean EVs.

GS Global, a general trading company under GS Group, which imports electric buses from Chinese company BYD, complained about the measure, claiming that energy density is irrelevant to performance and safety.

“The new rules seem to be intended to support Korean electric bus makers, which have smaller market shares,” a GS Global official said. “We just want predictability in government policies.”

Even before the environment ministry announces the measure, some Chinese EV importers reportedly asked the Chinese Embassy in Korea to send a letter to the Korean government to protest the new subsidy rules that are unfavorable to them.

The government, however, sided with domestic carmakers that have called for countermeasures against Chinese EVs which have increased their shares in Korea’s commercial vehicle market.

Regarding electric passenger cars, the government decided to cut subsidies by up to 20 percent for the purchases of EVs made by carmakers that do not operate after-sales service centers directly in Korea.

Except for Tesla running its own service centers in Yongin, Gyeonggi Province, and eight other regions, most other foreign carmakers have outsourced service centers here.

However, they are unlikely to be hit by the reformed subsidy rules, as the government will not cut subsidies for the purchases of EVs made by carmakers that directly train mechanics at their outsourced service centers.

In response, the Korea Automobile Importers &Distributors Association (KAIDA), comprised of importers of cars made in the U.S., Europe and Japan, said it respects the government’s decision.

“We expect the reformed rules to promote development and supply of EVs, and to enable consumers to have better chances to choose among a greater variety of products,” KAIDA said in a statement.