South Korea's 'IRA' Excludes EVs, Sparks Debate on Effectiveness

South Korea's government has announced a "Korean-style IRA" to be implemented over the next decade, aiming to bolster its six strategic industries: semiconductors, batteries, and solar power, among others. This initiative offers tax credits to companies based on their domestic production and sales, intending to enhance national competitiveness and curb the trend of manufacturing moving overseas.

However, the exclusion of electric vehicles from the tax credit program has drawn criticism. The automotive sector, with its extensive supply chains and significant job creation potential, is considered a crucial industry. Excluding EVs from this policy raises questions about its overall effectiveness and risks allowing China to gain a stronger foothold in both the global market and South Korea's domestic market, where Chinese EVs already hold a substantial share.

Further concerns have been raised regarding the policy's focus on domestic sales for tax credits. With a large portion of semiconductor production, such as that by Samsung Electronics and SK Hynix, being exported, the effectiveness of credits tied solely to domestic sales is being debated. This limitation could diminish the intended benefits for key export-driven industries.