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Tesla is lobbying the South Korean government to benefit from a local program that encourages car manufacturers to produce environmentally-friendly vehicles. If Tesla becomes a participant in the program, it is expected to receive significant profits from trading excess credit.
The policy requires carmakers to increase their share of green cars. If automakers fail to meet the government's goals, then the government fines the companies. If carmakers meet the required percentage of green car production, then the government provides incentives.
Tesla says this policy is unfair as it only applies to car manufacturers who have sold at least 4,500 vehicles in the country as of 2009, The Korea Times reported. But Tesla entered the Korean market only in 2017, so it cannot participate in this program. At the same time, the company's cars are in high demand in the local market with 11,826 units sold in 2020.
This policy is contrary to the principle of fair treatment according to the Korea-U.S. Free Trade Agreement (KORUS FTA). This principle requires governments to treat local and foreign businesses equally, given that foreign business products have entered the local market.
Any company that meets the annual requirements for the production of environmentally friendly vehicles is expected to be able to trade excess credits in the market with other firms. If Tesla becomes a participant in the program, it is expected to receive significant profits from trading excess credit.
At this point, the government has stated that it did not intend to treat foreign companies unequally. "If an EV company were to become subject to the policy, however, the policy would need to be complemented accordingly," said the environment ministry official. He also said that the government intends to outline the specifics of its policies by the end of the year.
The Korean news website reports that there are fears that the conflict with Tesla could escalate into a trade feud between the two countries.
© 2020, Eva Fox. All rights reserved.
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About the Author
Eva Fox
Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.
