[Editorial] In the Era of 1 Million Electric Vehicles, It Is Now Time for an Exit Strategy on Subsidies

The government announced that as of mid-April 2026, annual new electric vehicle registrations had reached 106,939, and the cumulative number of registered electric vehicles in Korea had also surpassed 1 million. As of March this year, electric vehicles accounted for 20.1% of all new cars. The government is evaluating this as a historic achievement marking the opening of the “era of 1 million electric vehicles.” Yet this is precisely the point at which we cannot help but ask again: if the market has already exceeded 1 million registered vehicles, should it not now be time to reduce the need for subsidies and assess the market’s ability to stand on its own?

Moreover, according to the government itself, the expansion of electric vehicle adoption is not due solely to the market’s own strength. It explains that high oil prices resulting from the recent situation in the Middle East, manufacturers’ new model launches and price discount competition, and the government’s expanded subsidies and accelerated deployment programs all worked together. In fact, in several local governments, the first-round subsidy allocations announced have already been exhausted, leading to a suspension of applications and registrations, and the government is now discussing ways to move up the second announcement and use central government funds first so that subsidy payments are not interrupted. Praising itself that electric vehicles have already been sufficiently adopted while at the same time seeking to prop up the market with even more fiscal resources and administrative power shows that the government has already fallen into a “subsidy dilemma.”

The government’s dilemma is simple. If the electric vehicle market has already grown to the scale of 1 million vehicles and secured a double-digit share of the new car market, then subsidies have largely achieved their original purpose of helping form the market. On the other hand, if demand is still difficult to sustain without subsidies even at this stage, and if supplementary budget funding must be added to cover another 20,000 passenger vehicles and 9,000 commercial vehicles just to prevent application suspensions, that also means the industry’s self-sustaining capacity has still not escaped dependence on policy. A policy that declares success while increasing support further undermines its own logic.

Even more concerning is the fact that the government is not merely providing purchase subsidies but is guiding consumer choice itself in a particular direction. In its 2026 subsidy reform, the government introduced a system that provides up to an additional 1 million won in “transition support payments” when consumers scrap or sell an existing internal combustion vehicle and purchase an electric vehicle. This is not a technologically neutral policy. What kind of car to buy, when to replace it, and which power source to choose are originally matters for consumers to judge comprehensively based on price, performance, convenience, and living environment. But the moment the government attaches a premium to a particular choice using tax money, the market tilts away from consumers’ free choice and toward the direction designed by policy.

The Center for Free Enterprise (CFE) does not oppose electric vehicles themselves. If electric vehicles are truly superior products, consumers will choose them even without subsidies. All they need to do is prove a competitive edge in price competitiveness, charging convenience, driving range, safety, and maintenance costs. It is by no means sound industrial policy for the government to promote with tax money technologies that should be tested in the market, while also adding pressure on internal combustion vehicle users to switch. An industry that grows under protection is shaken even more when that protection is reduced.

The direction of policy should now be clear. Electric vehicle subsidies should be phased out. In particular, biased incentives such as transition support payments premised on disposing of internal combustion vehicles should be discontinued. What the government should do is not predetermine the winner among specific technologies, but fairly design safety standards, information provision, and foundational rules so that consumers can make their own choices. The future of automobiles should be determined not by government subsidies but by consumer choice. If this truly is the era of 1 million electric vehicles, then now is the time not for a toast to the numbers, but for discussing an exit strategy for subsidies.

2026. 4. 22.

Center for Free Enterprise (CFE)

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Original title: [논평] 전기차 100만대 시대, 이제 보조금의 출구전략이 필요하다

Author: Center for Free Enterprise (CFE)

Date: 2026-04-22

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=comment&pn=1&idx=28824