South Korea is aiming to offset the blow of U.S. tariffs on its auto industry by boosting its subsidies for EVs sold domestically.
The details: The move will increase subsidies for electric vehicles by 20% as part of a broader package designed to help the auto sector absorb the impact of U.S. levies, reports Reuters.
Passenger EV subsidies will rise to 936 billion won ($658.47 million) in 2026, up from 780 billion won this year.
The plan also includes additional support for auto parts suppliers, lifting supply policy finance above the 15 trillion won ($10.35 billion) earmarked for 2025.
Why it matters: By making EVs cheaper at home and pumping more support into parts suppliers, Seoul is working to keep its auto industry competitive and its supply chain intact amid tariff pressures and broader U.S. trade concerns.
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Between the lines: Hyundai Motor and its affiliate Kia Corp., both based in South Korea, stand to be the biggest beneficiaries as the government moves to help the industry weather U.S. tariffs.
In July, Hyundai (which generates over 40% of its revenue in the U.S.) said it took a hit of 828 billion won ($606 million) from U.S. tariffs in Q2 and warned of a larger impact in Q3.
An agreement to lower the tariff rate from 25% to 15% as part of a $350 billion U.S. investment deal could help soften the blow—but South Korea clearly isn’t relying on that alone.
Hyundai is also ramping up domestic investment, announcing Sunday that it will invest 125.2 trillion won ($86.4 billion) in South Korea from 2026 to 2030 in response to the U.S. trade deal.
Bottom line: Stronger EV subsidies and expanded support for parts suppliers should help stabilize production and supply chains in Korea, keeping inventory flowing. But tariffs will continue to squeeze margins on U.S.-bound vehicles, meaning dealers should expect more EV promotions, mix shifts, and potentially greater emphasis on higher-margin trims and add-ons to protect profitability.
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