Why Tesla Is Opposing South Korea's Proposed Green Energy Vehicle Policy

Given the high cost of electric vehicles, government subsidies and incentives are a major factor that can alleviate the financial burden on manufacturers and prospective customers.

What Happened: Tesla Inc TSLA has opposed an incentive scheme that is being discussed by the South Korean government to promote new energy vehicle sales, The Korea Times reported. 

The new policy would require local automakers increase the share of green energy vehicles, and those that meet the standard would be rewarded, while the rest would be penalized, the report said.

Although the terms of the policy have not been worked out concretely, it is expected that companies meeting the standards will be able to sell excess credits in the market to other companies.

Tesla reportedly complained that the policy is against the equitable treatment mandated for both foreign and domestic players under the Korean-U.S. Free Trade Agreement.

A government official clarified that the policy is proposed to motivate traditional automakers to switch to green energy vehicles, and therefore it does not make sense to pay subsidies to a pure play EV company such as Tesla, the Korea Times reported. 

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The government is reportedly planning to work out the final framework of the policy by the end of 2021 and assess automaker green energy vehicle production in 2022. 

Fines would be levied on defaulters by 2023 and the amount collected would be used to set up infrastructure for eco-friendly cars, the report said.

Regulatory Credits In The US, China:  The zero-emission vehicle regulations adopted by several states in the U.S. and other countries mandate that a certain proportion of vehicles sold by automakers should be green energy vehicles.

EV manufacturers such as Tesla earn credits, while the traditional automakers who fail to meet the standard buy regulatory credits from those who earn it in order to avoid paying hefty fines.

In China, each new energy vehicle is assigned a specific number of credits depending on metrics such as electric range, energy efficiency and the rated power of fuel cell systems.

Vehicles boasting higher performance are eligible for more credit, with the maximum credits at six per vehicle.

Related Link: Tesla Sells Out Of Q1 Supply Of Model Y In China Just Days After Opening Order Page: Report

Photo courtesy of Tesla.