South Korea's Ministry of Economy and Finance (MOEF) unveiled its comprehensive 2026 Tax Reform Plan on 3 August, marking a notable shift in automotive tax policy.
Under the package, the individual consumption tax reduction currently granted to hybrid electric vehicles (HEVs) will expire at the end of December 2026 without extension. Hybrids have become commercially mature in Korea, with 284,310 units sold in the first half of 2026 — 43.0% of total domestic vehicle sales — so policymakers judged the subsidy no longer necessary.
By contrast, tax relief for zero-emission vehicles — battery electric vehicles (EVs) and hydrogen fuel-cell electric vehicles (FCEVs) — will be extended by two years through 2028, with a stepwise reduction of the per-vehicle cap: for EVs, the cap falls from 3.0 million KRW (2026) to 2.0 million (2027) and 1.0 million (2028); for FCEVs, from 4.0 million to 3.0 million and then 1.5 million. After 2028, the benefits transition into direct budgetary subsidy programmes.
In the first half of 2026, Korea registered 201,096 EVs (domestic brands 58.3%, imports 41.7%) alongside 560 FCEVs. The government expects a temporary rush of hybrid purchases in the fourth quarter as buyers use the remaining discount window.
Source: Korea Ministry of Economy and Finance, 3 August 2026.
