Tesla's China-made Model Y unlikely to receive full subsidy in Korea

Tesla's Chinese-made all-electric sport utility vehicle Model Y is unlikely to be eligible for full government subsidies in Korea, according to the Ministry of Environment.

The ministry issued a note saying that the EV subsidy assessment was still ongoing, and that the rear-wheel drive car, manufactured in Shanghai, does not meet two of the four criteria that would qualify them for the full subsidy amount.

“As the EV subsidy assessment is ongoing for Tesla’s Model Y, nothing has been decided in regard to the level of government subsidies and whether subsidies will be provided,” the ministry said in a note to reporters on Monday evening. The state-run Korea Environment Corp. is in charge of the assessment.

The ministry’s clarification came after a local outlet claimed that Tesla will be able to receive the full amount of subsidies for EV purchases as the US automaker had recently begun selling the made-in-China Model Y in Korea at the price of 56.99 million won ($45,000), which makes it eligible for the maximum rate of government subsidies.

The ministry offers 100 percent subsidy for EVs priced below 57 million won and 50 percent for those priced between 57 million won and 85 million won. EVs priced over 85 million won cannot receive any subsidies.

Automakers have to additionally meet four different criteria to be eligible for the maximum subsidy of 6.8 million won. Those include vehicle performance such as maximum driving distance per charge (up to 5 million won), whether automakers meet the government-assigned sales target of eco-friendly cars (up to 1.4 million won), automakers’ establishment of EV charging infrastructure (200,000 won) and application of innovative technology (200,000 won).

The ministry pointed out in the statement that Tesla was not assigned an eco-friendly car sales target and Model Y has not been applied with “innovative technology” under current regulations, indicating that Tesla’s all-electric EV will not qualify for the maximum subsidy amount.

Ten automakers in Korea have been assigned eco-friendly car sales goal by the government. They are Hyundai Motor, Kia, KG Mobility, Renault, GM, Mercedes-Benz, BMW, Volkswagen, Toyota and Honda.

Tesla on Friday launched the Model Y’s rear-wheel driving trim equipped with Chinese battery maker CATL’s lithium iron phosphate batteries, marking the first time for a China-produced Tesla to hit the Korean market. The rear-wheel driving trim’s price of 56.99 million won is much lower than the prices of the Model Y’s all-wheel driving long range and upgraded performance trims, which were set at 78.74 million won and 85.34 million won.

On top of the ministry subsidy, the Model Y’s actual purchasing price could be reduced even more with various EV subsidies from local governments. A local media outlet reported that about 15,000 orders were made for Model Y on the launch day last week, citing industry sources. Tesla did not disclose the exact sales figure.

Kim Pil-su, an automotive engineering professor at Daelim University, dismissed the impact the newly priced Model Y would have on the local market.

“Korean customers usually have a big reaction when there’s a new car. People used to notice Tesla vehicles on the road but no one gets awed by spotting a Tesla on the streets anymore,” he said.