In order to increase the country’s competitiveness in the burgeoning EV industry, the South Korean government is expanding tax advantages on investments in electric vehicle (EV) manufacturing facilities by amending the tax law ordinance, allowing businesses to obtain credits of up to 35%.
Five technologies and three establishments related to the future of transport, such as EV powertrain systems and charging systems, will be included in the list of national strategic technologies subject to support under the revised tax law ordinance, which was revealed by the Ministry of Economy and Finance on Tuesday.
The hydrogen sector has also introduced five new technologies and three new facilities, comprising clean hydrogen fuel storage and hydrogen fuel manufacturing.
The declaration follows the National Assembly’s passage in March of a new tax law that includes future automobiles in addition to chips as part of national strategic technology. The enforcing ordinance has been revised with support targets for the future automotive industry.
Five fields – chips, EVs, vaccines, secondary batteries, and displays – are offered differentiated benefits via tax credit schemes on national key technology industries.
For large and mid-sized businesses investing in the technology, the maximum tax credit has increased to 15%; for small and mid-sized businesses, it has increased to 25%.
For the higher typical amount of investment made over the last three years, a further 10% rebate will be provided this year.
Finance Minister Choo Kyung-ho stated that by include future modes of transport on the list of strategic industries, “we are going to offer unprecedented tax support.” Choo made his remarks on Tuesday while touring the Ulsan plant of Hyundai Motor Co.
The tax code amendment is anticipated to benefit the Korean auto behemoth Hyundai Motor Group the most, as it will provide it with credits worth hundreds of billions of won.
The construction of a new EV production line in Ulsan will cost Hyundai Motor 2 trillion won ($1.5 billion).
Kia Corp., its younger brother, would also invest 1 trillion won in the construction of a factory in Hwaseong, close to Seoul.
The buildings are anticipated to develop into mother factories which are essential for maintaining competition in the global EV market. A mother factory is the primary facility in charge of product R&D as well as manufacturing.
In order to take advantage of the Inflation Reduction Act (IRA), which benefits automakers who produce EVs and EV components in the United States, Hyundai Motor Group has chosen to construct its first EV facility in Georgia. The U.S. government provides tax incentives of up to 30% under the IRA to automakers who establish EV facilities there.
The limitations of special taxation act in Korea, however, resulted in large automakers receiving less than 1% of their capital, which left them with much less incentive to make investments in facilities there.
However, it is anticipated that the most recent tax code modification will encourage investments in EV infrastructure.
Both the Hyundai Motor and Kia EV plants are brand-new plants being built in Korea for the first time in 29 years, following Hyundai Motor’s Asan factory in 1996.
When both plants’ development is finished in 2025, EV production will start there as well. At its new plant, Kia plans to produce up to 150,000 EVs annually. The new EV facility from Hyundai Motor does not yet have a production capacity. In the first part of this year, Kia also wants to convert its ICE production site in Gwangmyeong, close to Seoul, into an EV line.
In order to improve the nation’s EV industry, Hyundai Motor Group intends to invest 24 trillion won by 2030. Its goal is to increase its yearly domestic EV manufacturing capacity to 1.51 million units by 2030 and its worldwide EV manufacturing capacity to 3.64 million units.
As of March, the Hyundai Motor Group had sold approximately 1.1 million electric vehicles since launching the BlueOn brand in July 2011. The auto industry giant hopes to build three times as many electric vehicles (EVs) in 2030 as it did in the previous 12 years.
By 2030, Hyundai Motor and Kia also intend to increase their EV lineups to include 31 different models, including the Ioniq 7 SUV from Hyundai Motor and the large-size SUV EV9 from Kia.
In keeping with the worldwide move towards electrification, Hyundai Motor Group is likewise working to develop the nation’s EV ecosystem. The company will equip its EV plants in Ulsan and Hwaseong with intelligent robots produced in Korea.
The company will also make investments in the creation of research centres, core element and new technologies, and the creation of next-generation EV platforms.
The shift will enable Hyundai Motor Group to expand the spectrum of its proprietary platform products, improve the power electric system, and create innovations that increase the amount of driving time between battery changes.
In order to maintain the convenience of its drivers while simultaneously expanding its network of charging stations, Hyundai Motor Group also intends to build high-speed charging infrastructure. To ensure a reliable and uniform system, Hyundai Motor and Kia will also construct a quality verification facility for their charging facilities in the initial half of this year.