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The Korea International Trade Association (KITA) has expressed deep concerns, indicating that the electric vehicle (EV) subsidy reform proposed by the French government might violate the Korea-European Union (EU) Free Trade Agreement (FTA). France is pushing forward with the introduction of new environmental regulations that determine subsidy eligibility based on the evaluation of carbon emissions from the production to the transportation of electric cars.
According to industry sources on Aug. 29, the Korea International Trade Association and the Korea Business Association Europe submitted an opinion to the French government on Aug. 25. It stated that the draft implementation rules of France’s “Green Industry Bill,” which contains the EV subsidy reform, might “potentially breach the Korea-EU FTA, which prohibits discriminatory treatment.”
The French government announced a draft amendment to the decree on the conditions for granting electric car subsidies at the end of July. Under this proposal, France intends to measure carbon emissions from the entire process of EV production, including maritime transportation, and award an “environmental score.” Only if a combined score exceeds a certain threshold can the subsidy be granted. Currently, subsidies are determined by the price of electric cars and their energy efficiency. However, this new scheme aims to consider the carbon footprint of the entire value chain. It’s planned to be implemented after a six-month grace period starting from January next year.
The dominant assessment is that this move aims to curb the rapid rise in market share of Chinese-made EVs within Europe. In Korea, it has even earned the nickname “French version of the IRA,” referring to the U.S. Inflation Reduction Act. The concern, however, is that Korean electric cars might also get caught in this crossfire.
If the draft is accepted, there’s a high possibility that Korean EVs exported to the EU may be excluded from subsidy eligibility. Industry insiders suggest that the farther the distance from Europe, including Korea, the more disadvantageous the subsidy judgment becomes. There are also concerns that France’s actions might spread to other countries within Europe.
In their opinion statement, the Korea International Trade Association pointed out, “The carbon emission coefficient for maritime transport has been set over 10 times higher than globally accepted data.” They argued that “This disadvantages electric vehicles imported from distant countries like Korea, hindering their qualification for subsidies.” They further emphasized their request for the “removal of the discriminatory maritime transport carbon emission coefficient clause targeting long-distance producing companies.”
An automobile industry insider commented, “While France itself is a significant market in Europe, it’s also one of the major EU countries. The primary concern is the possibility of other countries following suit.”
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