韩国电动车、钢铁、炼油石化与疫苗行业在国会议员主办的座谈会上联名呼吁扩大本土生产税抵免适用范围，但仅为游说诉求、无任何立法或政策落地

South Korea's electric vehicle, steel, oil refining and petrochemical industries, pushed to the brink by competition with China, are calling on the government to broaden eligibility for its domestic production tax credit. The credit currently covers six categories: solar power, wind power, secondary batteries, semiconductors, core materials and artificial intelligence robot components.
The domestic auto industry renewed its call to include electric vehicles in the credit at a debate titled "Is the Domestic Production Tax Credit Working?" held on Oct. 26 and hosted by Rep. Ahn Sang-hoon of the People Power Party. Chinese-made models' share of domestic EV sales has jumped to 38.1% this year from 4.7% in 2022, while the share of Korean-made EVs fell to 55.0% from 75.0% over the same period.
"The United States and the European Union are blocking the Chinese offensive on two fronts, with tariff barriers and preferential treatment for domestic production," said Kim Joo-hong, executive director of the Korea Automobile and Mobility Association. "Domestic automakers need the ammunition of cost savings through a production tax credit to secure price competitiveness and protect the employment ecosystem." Current purchase subsidies also go to imported EVs, the association said, making tax support that directly backs domestic production necessary.
The steel industry pointed to Chinese oversupply and rising domestic production costs. Chinese steel accounted for 62% of South Korea's steel imports last year, according to the Korea Iron & Steel Association. As Chinese steel flows into the country in greater volumes, domestic mills face mounting pressure on price. Costs are climbing as well. Industrial electricity rates rose 75.8% to 185.5 won per kilowatt-hour in the fourth quarter of 2024 from 105.5 won in the first quarter of 2022. "The steel industry faces a compound crisis of weak domestic demand, tougher trade restrictions, inflows of low-priced imports and rising energy costs, all while confronting the challenge of a low-carbon transition," said Lee Jae-jin, a director at the Korea Iron & Steel Association. "The industry needs tens of trillions of won in facility investment for the transition to carbon neutrality, so tax support that underpins domestic production is necessary."
The biotechnology industry asked that vaccines and biopharmaceuticals, which are excluded from production-stage support, be added. Both semiconductors and biotech and vaccines qualify for tax credits on research and development and facility investment under the national strategic technology program, but biotech and vaccines are left out of the domestic production tax credit. "Even with support for research and development and facility investment, it is hard to expand domestic production capacity without a mechanism that eases the cost burden of the actual manufacturing process," said Yeo Dong-ho, a vice president at LG Chem (051910.KS). "If semiconductors are the core industry of economic security, vaccines and medicines are the industry of life security, directly tied to the lives of citizens." Participants proposed phasing in coverage, starting with vaccines in the national immunization program and expanding to antibody drugs, cell and gene therapies, blood products, essential medicines and active pharmaceutical ingredients.
The oil refining and petrochemical industries also proposed including domestic production of eco-friendly fuels and feedstocks. Sustainable aviation fuel and bio-naphtha made from biological feedstocks carry higher raw material costs than conventional fossil-based products and incur additional expenses in pretreatment and refining, they said. Support for research and development and facility investment is already in place, but without support for actual production it is difficult to offset the cost gap that persists throughout manufacturing, they said.
Industry officials also warned that even if a blending mandate creates demand for sustainable aviation fuel, imports with stronger price competitiveness could fill the market in the absence of support for domestic production. "An SAF blending mandate only creates demand for SAF. It does not automatically secure a domestic production base," said Jang Yong-hee, a team leader at LG Chem. "Without support for domestic production, the required volumes could be covered by imports, leaving the country unable to secure a domestic production base and industrial competitiveness."