Seoul consumers eyeing Tesla Inc.’s Model Y in 2024 will encounter a significant price increase of 2 million won ($1,498.7) compared to the previous year. This surge is attributed to revised government subsidy guidelines, which have scaled back support for electric vehicles (EVs) utilizing low-cyclable batteries, such as lithium iron phosphate (LFP) batteries.
As reported by Maeil Business Newspaper, calculations indicate a substantial 62 percent reduction in EV subsidies for Tesla’s Model Y rear-wheel drive variant equipped with LFP batteries sourced from Contemporary Amperex Technology Ltd. (CATL). Under the newly announced EV subsidy guidelines by the Ministry of Environment, the subsidy for this model is set to plummet to 1.95 million won from 5.14 million won in 2023.
The delineation between EV batteries is primarily categorized into nickel-cobalt-manganese (NCM) batteries and LFP batteries. LFP batteries, due to their limited recyclability, are deemed less environmentally friendly than NCM batteries. At the end of their lifecycle, only lithium can be extracted from LFP batteries.
Consequently, vehicles equipped with LFP batteries are subject to lower environmental scores under the updated guidelines. These scores play a pivotal role in determining the “performance subsidy,” constituting the largest portion of EV subsidies. A diminished environmental score invariably results in a reduced subsidy.
Among domestically manufactured EVs, KG Mobility Corp.’s Torres EVX bears the brunt of subsidy reductions. The Torres EVX 2WD 18-inch model will witness a subsidy decrease to 4.7 million won in 2024 from 6.95 million won the previous year, reflecting a decline of 2.25 million won, attributed to its BYD Co. LFP batteries and energy density.
Kia Corp.’s Ray EV, classified as a compact car, also experiences a subsidy reduction to 4.52 million won from 5.12 million won in 2023. Notably, this model avoids a significant cut owing to its exemption from environmental scoring. South Korean EVs, predominantly equipped with nickel-cobalt-manganese (NCM) batteries, encounter fewer subsidy reductions, albeit minor decreases due to an overall subsidy reduction in 2024.
Chinese electric buses outfitted with LFP batteries observe subsidy reductions exceeding 50 percent, attributed to factors such as the absence of nationwide after-sales service centers. Subsidies for these buses diminish to approximately 20 million won in 2024 from around 50 million won the previous year.
In contrast, Hyundai Motor Co.’s Ioniq 6 garners an additional 40 million won in subsidies, surpassing the maximum government subsidy of 6.5 million won. This increase is attributable to an extra incentive of up to 1 million won provided proportionally to the manufacturer’s discount upon vehicle purchase.
