Hyundai's Kona makes French EV subsidy eligibility list

Hyundai Motor Co.'s sports utility vehicle Kona is the only Korean EV included on a list of 78 electric vehicle models eligible for French subsidies, while its affiliate Kia Corp. is set to miss out on the benefits, a move that industry watchers say reflects growing protectionism in Europe.

France on Thursday unveiled the list of 78 EV models from 22 brands that meet its new environmental requirements for benefits, under which it disqualifies vehicles with a substantial carbon footprint.

Hyundai Motor’s Kona SUV, manufactured in the Czech Republic, is the only South Korean EV selected to be eligible for subsidies.

Kia’s two SUV models Niro and Soul, shipped from South Korea, failed to meet the environmental standards in accordance with the so-called French Inflation Reduction Act (IRA).

The subsidy policy will take effect in July 2024 after a six-month grace period.

The release of the list met with immediate outcry in South Korea.

The Ministry of Trade, Industry and Energy said on Friday it will file an objection to the French government against the decision, saying it could slow Korea’s automobile exports to Europe.

The ministry will also request France’s review of the subsidy policy, while preparing countermeasures.

Automobile industry observers in Korea argue the new subsidy policy targets not only Chinese companies, but also Asian automakers amid growing regional protectionism.

France based its decision on carbon emissions generated throughout the entire process from vehicle production to transportation, which Korean carmakers complain is disadvantageous to non-European EV makers because maritime transportation emits more greenhouse gases than manufacturing processes.

Currently, France offers between 5,000-7,000 euros in subsidies to EVs priced 47,000 euros or below.

“Electric vehicle protectionism is becoming increasingly evident not only in France and the United States, but also in other parts of Europe and Japan,” said an automobile industry official.

Under the new subsidy policy, no Chinese EV models are eligible for the tax credit. They have rapidly penetrated into France thanks to their low prices.

Only six Japanese models – three from Toyota, two from Nissan and one from Mazuda – were named as eligible for the subsidy.

By comparison, European models, including those made by Renault, Stellantis and Volkswagen, make up the lion's share of the list. 

Twenty-four EV models from Jeep, Peugeot and Fiat under Stellantis are entitled to the subsidies. Eighteen Volkswagen models are on the list.

For Tesla, the Model 3 produced in China is ineligible for the tax credit, whereas the Model Y, manufactured in Berlin, Germany, meets the standards.

A total of 230,000 EVs were sold in France in the first 10 months of this year.

For Hyundai and Kia, France’s new subsidy policy may lead to a steep drop in sales there.

Hyundai and Kia are forecast to sell a total of 15,000-20,000 EVs in France this year, including 5,000-6,000 units of Kona EV produced in Europe.

They are considering adjusting sales strategy and production volume, including expanding production in Europe. Kia operates a plant in Slovakia.

In August this year, the Korea International Trade Association (KITA) and Korea Business Association Europe said the French version of the US' IRA may violate the free trade agreement between the two countries. 

Write to Sungsu Bae and Il-Gue Kim at baebae@hankyung.com
 


Yeonhee Kim edited this article.