Seoul buyers of Tesla Inc.’s Model Y in 2024 will face a 2 million won ($1,498.7) price hike compared to the previous year, due to new government subsidy guidelines reducing support for electric vehicles (EVs) with low-cyclable batteries such as lithium iron phosphate (LFP) batteries.

According to Maeil Business Newspaper’s subsidy calculations, Tesla’s Model Y rear-wheel drive model, equipped with LFP batteries from Contemporary Amperex Technology Ltd. (CATL), will see a 62 percent cut in EV subsidies under the new EV subsidy guidelines announced by the Ministry of Environment on Tuesday, dropping to 1.95 million won from 5.14 million won in 2023.

EV batteries are broadly divided into nickel-cobalt-manganese (NCM) batteries and LFP batteries. LFP batteries are viewed as having lower recyclability than NCM batteries because only lithium can be extracted from them at the end of their lifecycle.

As a result, vehicles equipped with LFP batteries receive lower environmental scores under the new guidelines. These scores are crucial for determining the “performance subsidy,” which constitutes the largest portion of EV subsidies, and a low environmental score inevitably leads to a reduced subsidy.

Among EVs from South Korean makers, KG Mobility Corp.’s Torres EVX faces the largest subsidy reduction. The Torres EVX 2WD 18-inch model’s subsidy will be reduced to 4.7 million won in 2024 from 6.95 million won the previous year, or a decrease of 2.25 million won, attributed to its BYD Co. LFP batteries and energy density.

Subsidies for Kia Corp.’s Ray EV, classified as a compact car, decreased to 4.52 million won from 5.12 million won in 2023. The model dodged a significant cut thanks to its exemption from environmental scoring. Korean EVs, which are mostly equipped with nickel-cobalt-manganese (NCM) batteries, saw fewer subsidy cuts, although minor reductions are inevitable due to an overall reduction in subsidies in 2024.

Chinese electric buses equipped with LFP batteries saw a subsidy reduction of over 50 percent, attributed to factors such as the lack of nationwide after-sales service centers. Subsidies for the buses dropped to around 20 million won in 2024 from approximately 50 million won the previous year.

Meanwhile, Hyundai Motor Co.’s Ioniq 6 received an additional 40 million won in subsidies, on top of the maximum government subsidy of 6.5 million won, thanks to the extra incentive of up to 1 million won given proportionally to the manufacturer’s discount when purchasing the vehicle.

By Hong Hae-jin, Park Je-wan, and Chang Iou-chung

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]