SEOUL (Reuters) -South Korea’s government said on Friday it would boost subsidies for electric vehicles (EVs) by 20% next year as part of a package to help the country’s auto industry weather risks caused by U.S. tariffs.
The government said in a statement passenger EV subsidies would be increased to 936 billion won ($658.47 million) in 2026, up from 780 billion won this year, in a bid to stimulate local demand.
The package will also include support to help auto parts suppliers, with the government pledging to supply policy finance at levels above the 15 trillion won it provided in 2025.
South Korea will also strengthen guarantee programmes for auto parts makers operating overseas, such as in the United States and Mexico, to offer long-term, low-interest loans.
The Asian country’s auto industry shipped exports worth $70.8 billion in 2024, accounting for more than 10% of the country’s $683.8 billion in total exports.
Hyundai Motor, which together with its affiliate Kia Corp is the world’s third-biggest automaking group by sales, has been hit by a 25% tariff for exports to the United States, its biggest market generating about 40% of revenue.
Washington and Seoul on Friday agreed to set tariffs on U.S. imports of Korean autos and auto parts at 15%, putting them on par with their Japanese competitors after Tokyo reached a deal with the U.S. in September.
The effective date when South Korean auto tariffs are cut to 15% will be retroactive to the first of the month the agreement is finalised and a bill on a $350 billion investment package is submitted to parliament, Seoul has said.
South Korea will also scrap its 50,000-unit cap on U.S.-made vehicles that meet federal motor vehicle safety standards, allowing them to enter the country without further modifications, according to a joint statement.
An agreement on lowering the tariff rate to 15% was reached after South Korean President Lee Jae Myung and U.S. President Donald Trump held a summit last month, but South Korea’s car industry has been waiting for the deal to be finalised.
(Reporting by Heekyong YangEditing by Ed Davies)
