[Op-Ed] EVs Must Build Competitiveness Beyond Subsidies

The structure of electric vehicle subsidies channels benefits to only a few, creating problems of resource inefficiency and unfair distribution

Some countries in China and Europe are moving to reduce and abolish subsidies, and the United States is also expected to sharply scale back support

Maintain the environmental benefits of electric vehicles while securing price competitiveness against internal combustion engine vehicles

The electric vehicle subsidy policy, funded by taxpayers’ hard-earned money, has clear limitations. In 2025, the Korean government allocated about 1.5 trillion won for electric vehicle purchase subsidies, and when combined with central and local government subsidies, support can reach about 6.7 million won per mid- to large-sized passenger vehicle in Seoul. While this subsidy policy contributed to the initial formation of the electric vehicle market, inefficiencies and structural problems are becoming increasingly apparent.

Fundamentally, electric vehicle subsidies are structured to benefit only a small number of people. Although these subsidies are financed by taxpayers, the benefits are concentrated on those who can afford to buy and maintain a new vehicle. In effect, this means using the taxes of low-income citizens to support private electric vehicle purchases. This regressive subsidy policy, under which the entire public supports the consumption choices of specific individuals, is causing inefficient and unfair allocation of resources.

Moreover, industry growth driven by subsidies cannot guarantee long-term stability. The electric vehicle industry has been an indirect beneficiary of subsidies. Instead of growing through fair competition with internal combustion engine vehicles, the electric vehicle industry has become highly dependent on subsidies and government policy support. Having fallen into reliance on unfair benefits, the industry has failed to establish superiority over conventional internal combustion engine vehicles in terms of price and performance, and is now facing a slowdown in demand known as the so-called “EV chasm.” This is a representative example of the crisis faced by industries that depend on subsidies.

Discussions on reducing electric vehicle subsidies are taking place around the world due to the fiscal burden of subsidies and environmental concerns related to electric vehicle batteries. Some countries in China and Europe have already begun discussing subsidy cuts and are moving toward abolition. Following President Trump’s election, even the U.S. government is seeking to sharply reduce support for electric vehicle purchases on the grounds that the market has matured.

Therefore, it is necessary to reconsider the electric vehicle subsidy policy. Preferential treatment for specific individuals and industries is an unfair form of distribution and disrupts the market. This makes the development of healthy industries more difficult. The time has now come to consider abolishing the electric vehicle subsidy system.

First, the government should gradually phase out its one-sided support policy for electric vehicle buyers. While the subsidy policy had a positive effect in the early stage of the electric vehicle industry, it also has clear limitations and harmful side effects. What matters is encouraging fair market competition that leads to technological development, lower production costs, and efficient use of resources without relying on subsidies.

Electric vehicle manufacturers must now prove that they hold advantages over internal combustion engine vehicles. While maintaining the environmental benefits of electric vehicles, they must also secure price competitiveness against internal combustion engine vehicles. The short driving range relative to charging time must continue to be improved. Unless these weaknesses are addressed, the electric vehicle industry will remain a troubled industry dependent on subsidies.

The electric vehicle subsidy policy is threatening the sustainability of the electric vehicle industry. In the short term, subsidies inflate demand and distort the market, while creating an environment in which firms that should be building self-reliance instead become complacent with government support. For the electric vehicle market to continue growing, it is essential to break free from subsidy dependence and secure competitiveness through technological development and lower production costs. Now is the time to end the inefficient structure of pouring taxpayers’ money into a specific industry and to create a healthy market ecosystem.

Jaewoon Cho, Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [칼럼] 전기차, 보조금 의존 벗어나 경쟁력 확보해야

Author: Jae-un Jo

Date: 2025-03-06

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&idx=27385