Starting on the 1st of this month, the automobile special consumption tax rose to 5% from 3.5%, and some brands fell out of eligibility for electric vehicle subsidies, prompting the auto industry to launch sweeping discounts. The strategy is to absorb as much of the price increases caused by the gap in various support benefits as possible to prevent consumers from walking away.
According to the auto industry on the 5th, Hyundai Motor is offering customers who buy the midsize sport utility vehicle (SUV) Santa Fe this month a basic discount of 1 million won, plus up to an additional 3 million won depending on vehicle conditions such as production timing.
Customers who purchase the midsize sedan Sonata, the midsize-large SUV Palisade, or the large recreational vehicle (RV) Staria can receive benefits of up to 3 million won. Genesis is also offering three models—the midsize-large sedan G80, the midsize SUV GV70, and the midsize-large SUV GV80—with a basic 1 million won discount plus up to an additional 10% off.
Hyundai Motor said, "This promotion was prepared to partially ease customers' burden of purchasing vehicles as the benefit of cutting the automobile special consumption tax to 3.5% from 5% ends in July." The cap on the special consumption tax cut was 1 million won, and when adding the education tax and value-added taxes calculated on that basis, the policy provided benefits of up to 1.43 million won.
Chevrolet of GM Korea is offering low-interest installment plans and fuel cost support for the small SUVs Trax Crossover and Trailblazer, plus around 400,000 won in special consumption tax support. Renault Korea will provide up to 2 million won in fuel cost support for the midsize SUV Grand Koleos depending on the production month, and either 2 million won in fuel cost support or 36 months interest-free for the small SUV Arkana.
Imported car brands also prepared sweeping discount events. Stellantis Korea set special consumption tax support at 960,000 to 1.03 million won for the Jeep midsize SUV Wrangler and 1.27 million won for the midsize-large SUV Grand Cherokee L. The large truck Gladiator is eligible for up to 2.5 million won in cash support. Peugeot models will receive either 600,000 to 900,000 won in special consumption tax support or up to 2.5 million won in cash support, depending on the model. Cadillac and GMC also decided to apply their own discounts equivalent to the tax increase.
BYD, which was dropped from eligibility for the government's national electric vehicle subsidies, set up its own subsidies in the same amount. As a result, the midsize SUV Sealion 7 is discounted by 1.52 million won, the midsize sedan Seal by 1.51 million to 1.69 million won, and the small hatchback Dolphin by 1.09 million won, keeping the actual purchase prices consumers feel the same as before.
The auto industry expects that the effective price increase caused by restoring the special consumption tax to 5% from 3.5% will affect sales. An auto industry official said, "Compared with vehicle prices in the tens of millions of won, the special consumption tax cut may look small, but in today's environment of high oil prices, high interest rates, and high inflation, it can feel significant to consumers," adding, "To maintain sales volumes, each brand has no choice but to absorb as much of the price increase factors as possible."