Electric vehicles are parked at a charging station in Seoul in this file photo. Newsis

By Park Jae-hyuk

The Ministry of Environment informed automobile industry officials recently that it may reduce subsidies for the purchases of electric vehicles (EVs) made by foreign carmakers that do not operate their own service centers in Korea, according to industry sources, Friday.

The ministry's plan is viewed as an apparent countermeasure against the U.S. Inflation Reduction Act (IRA) which denies tax incentives for the purchases of EVs assembled outside of North America.

During a meeting with representatives of carmakers and lobby groups for the automobile industry on Dec. 15, the environment ministry told them that up to 5 million won ($3,900) in subsidies that have been paid for the purchase of EVs satisfying mileage standards may halve, if their manufacturers do not operate aftersales service centers directly in Korea.

Hyundai Motor, Kia, GM Korea, Renault Korea Motors and SsangYong Motor, which will be renamed KG Mobility in March, have operated their own service centers here. Tesla also runs its own service centers in Yongin, Gyeonggi Province, and eight other regions.

Most other vehicle importers, however, have outsourced service centers.

In addition, the environment ministry is also considering giving additional benefits for the purchase of EVs whose batteries can also be used as chargers. Among EVs sold on the Korean market, only those made by Hyundai Motor Group can fulfill that function.

However, the Korea Automobile Importers & Distributors Association protested the environment ministry's plan.

"Most of our members have provided aftersales services in earnest to consumers of EVs by establishing nationwide networks," the association said in a statement. "We are concerned about potential disadvantages to our members and their customers."

In response, the environment ministry explained that it has conducted studies every year to reform the rules on subsidies for the purchase of EVs.

"We will reform the rules after listening to the opinions of relevant ministries and stakeholders," the ministry said. "Nothing has been determined yet."

The ministry will finalize its plan in January on EV purchase subsidies.

Since the U.S., the European Union and China made moves to prioritize giving incentives to the purchase of EVs manufactured in their territories, calls have grown for the Korean government to take similar measures.

Korea International Trade Association Executive Vice Chairman Jeong Marn-ki also urged the government recently to take countermeasures against other countries discriminating against made-in-Korea EVs.

Amid the growing controversy, the U.S. Department of the Treasury announced on Thursday (local time) that electric vehicles leased by consumers can qualify for up to $7,500 in commercial clean vehicle tax credits. The announcement was made after the continuous requests from the Korean government and Hyundai Motor Group to include rental cars and leased vehicles in EVs that can qualify for tax credits.

Although Democratic Senator Joe Manchin urged the treasury department to refuse the requests, the U.S. government eventually decided to side with Korea and its allies in an apparent attempt to appease them.