Korea’s finance ministry said Tuesday the government will expand support on the electric vehicle (EV) sector under a new tax code that centers on lending hands to strategic industries amid ailing exports and economic uncertainties.
The move came after the parliament passed a bill to offer a tax credit rate of 15 percent on facility investment in strategic industries, including chips, higher than the previous rate of 8 percent.
The rate for small and midsized businesses also rose from 16 percent to 25 percent. An additional 10 percent cut will also be applied for the increased amount of investments compared with the average of the previous three years.
The decision to offer tax benefits to the EV industry came as automobiles have recently emerged as a new growth engine for Korea’s exports, which has been hit hard by global economic uncertainties.
“While exports of major sectors, including chips, remain sluggish, shipments of cars have been setting new fresh highs, led by EVs,” Finance Minister Choo Kyung-ho said during his visit to Hyundai Motor’s production line in Ulsan, 299 kilometers southeast of Seoul.
Car exports spiked 40.3 percent on-year to $6.16 billion in April, which has shown on-year growth for the past 10 months in a row.
The overall outbound shipments, on the other hand, fell 14.2 percent on-year to $49.6 billion. The decline came as exports of semiconductors, the country’s key export item, sank 41 percent on-year.
During Choo’s visit, Hyundai Motor reaffirmed its plan to break ground for a new EV production line in Ulsan in the fourth quarter with a budget of 2 trillion won ($1.51 billion).
Korea will continue to spare no efforts to promote investment in next-generation automobiles, including the secondary battery and autonomous-driving technology sectors, the finance ministry added.
Concerning the U.S. Inflation Reduction Act (IRA), Choo said the government will continue to “closely consult” with Washington to protect interests of Korean carmakers.
The IRA gives up to $7,500 in tax credits to buyers of EVs assembled only in North America, sparking concerns that Hyundai Motor and its smaller affiliate Kia could lose ground in the U.S. market, as they make most of their EVs at domestic plants for export to the United States. (Yonhap)
