South Korea's New EV Policy: Boost for Hyundai and Kia, Challenge for BYD and Tesla Model Y
South Korea has implemented a new electric vehicle (EV) policy that aims to give domestic automakers an advantage over foreign manufacturers, specifically targeting BYD and Tesla Model Y. The revised policy, announced on February 6th, focuses on the type of battery used in EVs, favoring Hyundai and Kia.
Subsidies Based on Battery Performance
The government's main objective is to provide a competitive edge to domestic automakers as a response to the lower-cost LFP batteries used by Tesla and BYD. To achieve this, the policy reduces subsidies for EVs equipped with "lower-performance batteries" such as LFP batteries that are popular in China.
The maximum grant available under the new policy is now around $4,800, slightly lower than the previous year. The eligibility for the subsidies will be determined based on the vehicle's range, price, and battery type. In addition, the price cap for eligible EVs has been lowered to $41,000.
BYD and Tesla Model Y Impact
BYD has emerged as a leading player in the LFP battery market and holds a significant market share. Similarly, Tesla has seen success in South Korea with its more affordable Model Y variant that is equipped with an LFP battery. The price reduction of this model has led to a significant increase in Tesla's sales in the country.
However, with the new EV policy in place, the advantage may shift towards Hyundai and Kia. Their EV models, such as the IONIQ 5 and EV6, are equipped with NCM batteries, which make them eligible for higher subsidies. This adjustment in subsidies creates a more favorable situation for Hyundai and Kia's models over those with LFP batteries like Tesla's Model Y.
BYD's Entry into the South Korean Market
BYD has plans to enter the South Korean market with its models, including the Atto 3, aiming to directly compete with Hyundai and Kia offerings. However, with the new policy favoring NCM batteries, it may pose a challenge for BYD to establish a strong presence in the South Korean EV market.
International Efforts to Regulate the EV Market
South Korea's latest EV policy reflects the broader international efforts to regulate the EV market. It emphasizes the need for domestic competitiveness and addresses the challenges associated with mass adoption of EV technology.
With the global shift towards electrification, governments are implementing policies to support their domestic automakers and encourage the production and adoption of EVs. The new policy in South Korea is a step in this direction, aiming to create a level playing field and promote local manufacturers while addressing the cost challenges posed by lower-cost battery options.
As the EV market continues to evolve, policies like this will play a crucial role in shaping the competitive landscape and driving the transition towards a greener future.
Analyst comment
Positive news: South Korea’s new EV policy benefits domestic automakers Hyundai and Kia, giving them a competitive edge over Tesla and BYD by focusing on NCM batteries. This adjustment in subsidies creates a more favorable situation for Hyundai and Kia’s EV models. BYD plans to enter the South Korean market, aiming to compete directly with Hyundai and Kia offerings.
Market prediction: With the revised policy favoring Hyundai and Kia, the market share of their EV models is expected to increase, while Tesla and BYD may face challenges in South Korea. This policy reflects the global trend of prioritizing domestic competitiveness and addressing mass adoption challenges in the EV market.
