Tesla is looking for the South Korean government to revise an eco-friendly vehicle sales program that gives automakers tradeable incentives for selling low-emissions vehicles. The electric automaker says that the agreement is discriminatory and violates the Free Trade Agreement that sits between South Korea and the United States.
The “Low Emission Vehicle Supply Target System” is set to be implemented this year, and automakers that sold 4,500 cars in South Korea in 2009 qualify for the program. The problem is, even though Tesla is the world’s leader in selling eco-friendly electric cars, the company doesn’t technically qualify for the incentive-giving program. Tesla only sold 937 cars in South Korea in 2009, not meeting the required 4,500 vehicle threshold.
Business Korea reported that being included in the program could lead to billions of Korean Won being awarded to the automakers who meet the target requirements. Each credit is tradable, sources told the Korean news outlet, which could add up to $30 million to Tesla’s margins due to current sales volumes in the country. However, because of not meeting the sales requirement in 2009, Tesla isn’t expected to see any of that money currently.
The South Korean Government stated that the plan is not discriminatory and is related to previous talks that the country had with the U.S. government. Additionally, government spokespeople said that the target system lines up with the U.S.-South Korea Free Trade Agreement.
Other United States-based automakers who do not import many cars to the country asked for revisions, and 4,500 units was the number that was landed on. “The U.S. government requested exceptions for smaller sellers such as Cadillac, and its demarcation was 4,500 units,” the government said.
Tesla didn’t introduce the Model S until 2012, three years after the 2009 guidelines South Korea is using. Furthermore, Tesla didn’t mass produce a car until 2017, when the Model 3 was introduced to consumers. Since then, it has become the best-selling electric vehicle in the world.
It is currently unknown if South Korea will introduce any changes that will allow Tesla to qualify for the rewards. Fears of a trade dispute between South Korea and the United States seem to be the holdup, according to local sources, as trade experts believe it could be difficult to revise the plan this late without negative consequences.
“The reason for setting the exception standard was to protect domestic companies, but it could be argued that it was used to give disadvantages. There are also voices of concern that the battle with Tesla, the largest electric vehicle company in the United States, could lead to a trade dispute between Korea and the United States.”