As new electric vehicles hit the market in greater numbers, the imbalance in subsidies by region has come under scrutiny. In cities with strong demand, subsidies run out early and trigger a "lightning click" race, while in some areas few people want to buy electric cars, leaving subsidies unused. The Ministry of Environment is reportedly reviewing a plan to peg national electric vehicle subsidies to local government funding to address this problem.
According to the Zero Emission Vehicle Integrated Portal on the 23rd, in more than 20 cities and counties including Daegu, Sejong, Suwon (special case city), Bucheon, Pyeongtaek, Yeosu, and Cheongsong County, this year's electric vehicle subsidies were exhausted early. More than 1 out of 10 local governments nationwide reached a point where they could not pay subsidies before the end of the third quarter.
In the case of Daegu, applications for subsidies closed on the 18th of last month. The city plans to resume applications through a supplementary budget, but there is speculation that the additional subsidies will be exhausted as soon as they resume. An official said, "There is a high possibility that it will close within a day or two after applications open." Bucheon, which opened applications for second-half electric vehicle subsidies on Jul. 1, ran out of its budget in three days. Changnyeong County is informing residents that it will "close subsidies without a supplementary budget."
By contrast, Jeju Island, which has a high share of electric cars and received substantial subsidies, still has subsidies remaining this year for 2,161 vehicles. Haman County, Uiryeong County, Sacheon, Goryeong County, Cheongdo County, and Yeongdeok County also have surpluses. A Haman County official said, "Because there are many older residents, demand for electric cars is not high," adding, "We couldn't exhaust all the electric vehicle subsidies last year either."
The reason such regional gaps in electric vehicle subsidies occur is that the program operates on a national-local matching structure. National funding is paid uniformly nationwide according to vehicle performance, but local funding varies widely depending on each local government's fiscal conditions and policy direction.
For example, a Seoul resident who buys the Ioniq 6 Standard 2WD 18-inch (wheel size) model receives 6.95 million won in subsidies, while a resident in some parts of North Gyeongsang Province receives 17.35 million won.
The problem is that if either the national or local funding is exhausted, you cannot apply for subsidies. To partially ease this, the Ministry of Environment improved the system this month so that applicants can apply for national funding alone even if local subsidies are depleted. Accordingly, even if local subsidies are used up, buyers can purchase an electric car by receiving only national funding through the Korea Environment Corporation (K-eco).
Conversely, if the national funds allocated to a local government run out, buyers cannot even apply for subsidies with the local government. Even if local subsidies remain, they can receive only national funding from the Korea Environment Corporation (K-eco). Because national funds are not allocated in proportion to population, regions with larger populations and higher demand for electric cars are more likely to run out early.
Because of this subsidy imbalance, the budget lapse rate is also considerable. The unused budget for the Ministry of Environment's zero-emission vehicle supply program, which pays purchase subsidies for electric and hydrogen cars, rose from 112 billion won in 2021 to 798.2 billion won last year. In this year's second supplementary budget, the program also underwent expenditure restructuring totaling 467.3 billion won.
A Suwon official said, "We usually draft the local subsidy budget based on the previous year's demand, but with many new models launching this year and rising popularity, it was hard to predict," adding, "The budget was used up faster than expected." A Bucheon official also said, "Because local finances are weak, we are cutting the subsidy budget itself," and added, "Next year, we plan to reduce the per-vehicle subsidy further to pace the depletion."
Criticism of this program structure also surfaced at the National Assembly's settlement of account subcommittee. Lee So-young of the Democratic Party of Korea said at a meeting on the 3rd, "In regions with larger populations and higher demand for electric cars, you have to engage in 'lightning clicking' to get subsidies, while in areas with low demand, electric vehicle subsidies are left over," adding, "The Ministry of Environment needs a comprehensive plan for the entire system." With demand for electric cars continuing to grow, there are calls to overhaul the subsidy system to close regional gaps and enable support focused on real buyers.
In response to such criticism, the Ministry of Environment is said to be reviewing alternatives, including a plan to provide national funds in proportion to local funding. A ministry official said, "We recognize that the current electric vehicle subsidies are not structured in proportion to population," adding, "We are looking for ways to address the issues raised by the National Assembly."