South Korea's Plan to Boost EV Sales and Support Auto Industry

Government Announces 20% Increase in EV Subsidies for 2026

South Korea is taking significant steps to strengthen its auto industry. The government has announced plans to increase subsidies for electric vehicles (EVs) by 20% in 2026. This move aims to boost local demand and support the industry amid concerns over U.S. tariffs.

Financial Allocation and Industry Support

The government has allocated 936 billion won ($658.47 million) for EV subsidies next year, up from 780 billion won this year. This increase is part of a larger package to help the auto industry. The package also includes support for auto parts suppliers. The government plans to provide policy finance above the 15 trillion won it supplied in 2025.

Supporting Overseas Auto Parts Makers

South Korea is also focusing on supporting auto parts makers operating overseas. The country will strengthen guarantee programs for these makers, offering long-term, low-interest loans. This support is crucial as the auto industry is a significant part of South Korea's economy.

Economic Impact and Trade Challenges

In 2024, the auto industry shipped exports worth $70.8 billion. This amount accounts for more than 10% of the country's total exports. The industry faces challenges due to U.S. tariffs. However, the tariff rate was lowered to 15% after a trade agreement between Washington and Seoul.

Despite the agreement, the 15% tariff rate has not been applied yet. The countries have not issued a joint fact sheet outlining the agreement. South Korean Foreign Minister Cho Hyun has asked U.S. Secretary of State Marco Rubio to release the fact sheet swiftly.

Conclusion

The auto industry is vital for South Korea's economy. The government's support aims to ensure the industry's growth and stability. The increase in EV subsidies and support for auto parts makers are steps in the right direction. However, the industry still faces challenges due to tariffs and the need for clear agreements.