South Korea to Overhaul EV Subsidy Framework as Registrations Surge 113.6% in H1 2026

SEOUL — South Korea's Ministry of Climate, Energy and Environment announced on August 7 that the government will commission a comprehensive review of its electric vehicle purchase subsidy system, as rising EV demand has caused local government subsidy funds to run dry across multiple regions. The Korea Automobile & Mobility Association (KAMA) reported that 198,509 new EVs were registered in the first half of 2026, a year-on-year increase of 113.6% and representing 23.3% of all 850,636 new vehicle registrations. Some analysts interpreted the surge as a signal that the market has moved beyond the temporary demand plateau — the so-called EV chasm — that followed the subsidy tapering of previous years. Under the current framework, EV purchase subsidies are split between national and local government contributions, with municipal authorities required to pay a minimum of 30% of the national subsidy. As oil prices climbed amid geopolitical tensions, EV demand in several regions outpaced local budget allocations, leaving would-be buyers without subsidy support. The ministry said it will examine whether the current 30% local co-payment floor remains appropriate and whether individual model subsidy amounts reflect real-world cost structures — particularly as larger electric cargo trucks complete certification and enter the market. The government is also weighing whether subsidy amounts should be calibrated to give electric commercial vehicles competitive parity with diesel alternatives. Both Tesla Korea and BYD Korea have launched self-funded support programmes in regions where government subsidies have been exhausted. Tesla's programme, launched on August 3, offers company-funded discounts of 1.68 million to 2.15 million won per vehicle, valid through September 30. BYD Korea extended its self-funded subsidy equivalent to the national payment through the end of August.