On the 28th, it was learned that the Ministry of Climate, Energy and Environment will announce next week the automakers and importers that will receive electric vehicle subsidies. This will be the first time the ministry discloses recipients since overhauling the criteria for paying electric vehicle subsidies.
Until now, the ministry has provided subsidies to electric vehicles that met performance standards such as range per charge. But starting this year, it decided to award subsidies based on an assessment of how much manufacturers and importers have contributed to the domestic electric vehicle ecosystem.
Accordingly, the auto industry expects domestic manufacturers to have an advantage over importers in receiving subsidies. Some warn that if many importers are excluded from eligibility for subsidies, trade friction could arise. The World Trade Organization (WTO) bans actions that discriminate against imports compared with domestic products.
The ministry says it will refine the system over time to address issues raised during implementation. Analysts say Korea should consider the French case, which protected domestic industry while avoiding trade friction.
◇ Government overhauls criteria for paying electric vehicle subsidies... evaluating contributions to the domestic industrial ecosystem
Currently, the ministry provides purchase subsidies when consumers buy a new electric vehicle that meets standards such as range per charge and battery performance. Major models eligible for subsidies include the Tesla Model 3 and Y, Hyundai Motor the New Ioniq 6, Kia EV3, and BYD Dolphin and Seal. Subsidies are up to 5.8 million won for midsize and large vehicles and 5.3 million won for small and smaller vehicles, respectively.
Starting next month, the ministry will award subsidies only to those scoring at least 60 out of 100 based on evaluations of importers' and manufacturers' contributions to supply chains, research and development capabilities, and responses to environmental policy. The highest-weighted item, contributions to supply chains (40 points), assesses whether there are domestic production facilities, whether parts are procured domestically, and whether domestic jobs are created.
Analysts therefore say domestic firms will be better positioned than importers to receive subsidies. An industry official said, "There are categories where importers can score high, such as the research and development capabilities of overseas headquarters, but those carry relatively less weight than contributions to supply chains."
◇ WTO bans discrimination against imports... France supports domestic firms while avoiding trade friction by using "carbon emissions" criteria
The WTO enshrines the "national treatment principle," which says member countries must not discriminate against foreign products or services compared to domestic ones in terms of taxes and regulations. In the early 2010s, Ontario, Canada, was sued by Japan and the European Union (EU) after it provided subsidies to solar and wind power operators while requiring them to use a certain share of domestic parts in their equipment. In 2013, the WTO ruled that this violated its rules. Ontario later scrapped the relevant rules.
China is also arguing that the EU's electric vehicle subsidies, slated for introduction at the end of this year, violate WTO rules. The EU is pushing a plan that would require vehicles to be assembled within the bloc and 70% of non-battery parts to be sourced within the bloc to receive subsidies. China has pushed back, calling it "serious institutional discrimination" and urging the EU "to comply with WTO rules."
Among major countries, France is cited as a case that introduced electric vehicle subsidies to raise domestic firms' market share while avoiding trade friction. Since 2024, France has provided subsidies only to vehicles that meet certain standards based on an assessment of carbon emissions during production. It used a method that calculates lower emissions the closer the product is made to France, on the grounds that less carbon is emitted during transportation.
As a result, vehicles produced in China found it difficult to meet the standards set by the French government. Ultimately, Renault's Renault 5 and Germany-made Tesla Model Y received subsidies, but China-made Tesla Model 3 and BYD Sealion 7 did not. According to Reuters, the share of three China-produced models in France's new electric vehicle sales plunged from 32% in December 2023, just before the system took effect, to 4% in April 2024. In 2025, all 10 top-selling annual models were European brands, six of which were French brands.
The Centre for European Reform (CER) called it "an effective model that steered demand toward European electric vehicles while filtering out China-made production and did not run afoul of the WTO."