South Korea will increase subsidies for electric vehicles in 2026, a move designed to cushion its automotive industry against potential tariffs imposed by the United States, the Ministry of Trade, industry and Energy announced Tuesday. The increased financial support aims to maintain the competitiveness of Korean EV exports as the U.S. Inflation Reduction Act (IRA) incentivizes domestic production and potentially levies tariffs on foreign-made vehicles.
The planned subsidy boost is a proactive response to growing concerns within the South Korean auto sector about the impact of U.S. trade policies. The IRA, while initially offering incentives for all EVs, increasingly favors North American-assembled vehicles, potentially disadvantaging major Korean automakers like Hyundai and Kia, which currently rely heavily on exports to the U.S. market. The increased subsidies will help offset potential cost increases stemming from tariffs, allowing Korean manufacturers to remain competitive in the crucial American market and preserve jobs within the domestic industry.
Currently, South Korea provides subsidies of up to 5.5 million won ($4,200) for domestically produced EVs. The Ministry indicated the 2026 increase will be significant, tho specific figures where not disclosed, pending further review and budgetary allocations. Officials stated the government is also exploring additional measures to support the industry, including investments in battery technology and supply chain diversification.
“We are committed to ensuring the continued success of our automotive industry in the face of evolving global trade dynamics,” said a Ministry spokesperson. “These measures are designed to safeguard our export competitiveness and foster innovation in the EV sector.”
The move comes as the U.S. Department of Energy recently proposed stricter rules regarding the sourcing of battery components and minerals for EV tax credits, further complicating the landscape for foreign automakers. South Korea is a major producer of EV batteries, and the government is working to ensure its battery manufacturers can meet the new U.S. requirements.
