As of the end of July, nationwide electric vehicle subsidies have been reported to be over 70% exhausted. Some local governments have completely depleted their electric vehicle subsidies. Last year, demand decreased due to electric vehicle fires, but this year, the combination of the base effect and the new model effect has led to an increase in electric vehicle sales.
According to the integrated website for zero-emission vehicles as of the 2nd, it was estimated that 69,646 electric vehicles had received subsidies from 159 local governments by the 1st. This represents about 72.8% of the 95,683 units announced for the private sector. The electric vehicle subsidies consist of national and local funds, with local governments providing the national funds as well.
Consumers only need to pay the remaining amount after applying for subsidies from the local government following the purchase contract for electric vehicles. This year, vehicles costing less than 85 million won are eligible for subsidies. Maximum amounts of 5.8 million won can be received for passenger cars from national funds, with up to 1.1 million won from local funds.
Due to budget depletion, cities such as Gwangju and the Gyeonggi province cities of Uijeongbu, Bucheon, and Pyeongtaek have halted subsidy payments. In Daejeon and the Gyeonggi city of Ansan, and Gangwon's Wonju, only about 100 units remain. Incheon City has even issued a notice stating, "Due to a flood of inquiries, our processing of requests is significantly delayed. We kindly ask to refrain from making excessive follow-up calls."
This is the complete opposite of the situation a year ago. Last year, the nationwide electric vehicle subsidy exhaustion rate was only 65.4% (according to national funds), and there were local governments with more than half remaining. The exhaustion rate for 2023 was 74.3%. An official from Ulsan City noted, "Last year, electric vehicle purchases slowed due to electric vehicle fires and other factors, leading to a smaller budget allocation this year," and added, "As nationwide purchase demand increases this year, the pace of subsidy exhaustion has accelerated."
The budget for electric vehicle subsidies is on a declining trend, from 1.918 trillion won (based on national funds) in 2023, down from 1.734 trillion won last year, and to 1.5057 trillion won this year, while demand for electric vehicles has increased. According to the Kaizyu Data Research Institute, electric vehicle new car sales in the first half of this year reached 93,569 units, a 42.7% increase compared to the same period last year (65,557 units). This accounts for 11.1% of total new car sales.
This is attributed to the new model effect. Of the nine new models registered in the first half of the year, five were electric vehicles. The Kia EV3 sold 12,299 units in the first half of this year, making it the best-selling electric vehicle. The Tesla Model Y, released after a facelift in four years, was also sold 15,432 units in the first half, reflecting a 53.7% increase compared to a year ago.
Local governments that have run out of subsidy budgets are seeking to secure additional funding. Incheon City announced at the start of the year that the potential scale for subsidy payments was 5,013 units, but increased it to 5,383 last month. Ulsan City is reportedly working to prepare a supplementary budget as it is expected to exhaust its budget soon. An official from one local government stated, "While some local funds are still available, the lack of national funds has led us to look for ways to secure additional national funding."