South Korea Boosts EV Subsidies 20% To Counter Trump Tariffs As Hyundai-Kia Struggle

South Korea announced Friday it will increase electric vehicle subsidies by 20% in 2026 as part of a broader support package designed to help the country’s automakers survive the Trump administration’s punishing tariffs. The move signals Seoul’s willingness to fight protectionism with government intervention—a strategy that’s becoming standard playbook as the global trade war reshapes the EV industry.

The South Korean government will raise passenger EV subsidies to 936 billion won ($658.47 million) in 2026, up from 780 billion won in 2025, according to Reuters. The increase aims to stimulate domestic demand at a time when Korean automakers face a 25% U.S. tariff on exports that threatens their most profitable market.

Comprehensive Auto Industry Support Package

Beyond direct EV buyer subsidies, Seoul is deploying a multi-pronged approach to shield its critical auto sector from tariff damage. The government pledged to provide policy finance to auto parts suppliers at levels exceeding the 15 trillion won ($10.5 billion) it supplied in 2025.

South Korea will also strengthen guarantee programs for auto parts manufacturers operating overseas, particularly in the United States and Mexico. These programs offer long-term, low-interest loans designed to help suppliers maintain operations despite higher costs from tariffs and supply chain disruptions.

The support package comes as South Korea’s auto industry represents more than 10% of the country’s total exports. In 2024, Korean automakers shipped $70.8 billion worth of vehicles and parts internationally out of the country’s $683.8 billion in total exports.

Hyundai-Kia Face Existential Tariff Threat

The subsidies target a specific problem: Hyundai Motor and its affiliate Kia Corp—together forming the world’s third-largest automaking group by sales—derive approximately 40% of their revenue from the United States. The 25% tariff on Korean auto exports hits them directly in their most profitable market.

Washington and Seoul reached an agreement in late October 2025 to reduce tariffs on Korean autos from 25% to 15%, matching the rate applied to European Union and Japanese vehicles. However, even at 15%, the tariffs represent a dramatic increase from the duty-free treatment Korean vehicles enjoyed under the Korea-U.S. Free Trade Agreement before Trump’s tariff regime took effect.

The agreement came after South Korea committed to a $350 billion investment package in the United States, including $150 billion directed toward shipbuilding support and $200 billion in cash investments across semiconductors, batteries, and other sectors.

Post-Tariff Reality For Korean Automakers

For Hyundai-Kia, the math is brutal. With the two companies exporting over 1 million vehicles annually to the United States, even a 15% tariff adds roughly $2,250 per vehicle at an average price point of $15,000 wholesale. That translates to more than $2.25 billion in annual tariff costs—money that must either be absorbed by the manufacturers, passed to consumers through higher prices, or offset through government support.

Korean automakers are responding by ramping up U.S. production. Hyundai Motor Group plans to invest $9.3 billion in U.S. operations over the next four years, expanding its Georgia plant’s capacity from 300,000 to 500,000 vehicles annually. The company aims to produce 1.2 million vehicles yearly in the United States by the end of the decade, reducing dependence on Korean exports.

But building new factories takes time and capital. In the meantime, subsidies provide a lifeline by maintaining domestic market demand while export markets face tariff headwinds.

EVXL’s Take

This subsidy increase exposes the circular logic trap that’s swallowing the global EV industry whole. South Korea is boosting subsidies because U.S. tariffs are killing exports. The U.S. imposed tariffs partly because it views subsidized Korean EVs as unfair competition. And meanwhile, Chinese manufacturers—the real competitive threat everyone’s ignoring while they fight each other—continue to crush both Korean and American automakers with even more aggressive government support.

We’ve been documenting this slow-motion disaster for months. Back in May, we reported how Hyundai delayed its $730 million hypercasting plant specifically because of Trump’s 25% tariffs combined with softening EV demand. The same month, we covered Hyundai’s 1% price increase on U.S. EVs as the company tried to pass tariff costs to consumers. In April, we documented how Hyundai halted EV production in South Korea amid the tariff chaos.

The timing couldn’t be more ironic. The United States eliminated its $7,500 federal EV tax credit on September 30, 2025, under Trump’s “Big Beautiful Bill”—a move that devastated U.S. EV demand and led to mass layoffs across the industry. Rivian cut 600 jobs in October specifically because of the credit’s elimination. So while Washington lectures other countries about subsidy distortions, it simultaneously uses tariffs to force those countries to increase their own subsidies. The policy incoherence is staggering.

Here’s what nobody wants to admit: subsidies don’t create sustainable EV industries—they create subsidy-dependent industries. We’ve seen this movie before with solar panels. When the subsidies inevitably end or tariffs block exports, manufacturers either collapse or demand more government support. It’s a doom loop.

And while Korean, American, and European automakers fight over subsidy scraps and tariff rates, Chinese manufacturers are eating everyone’s lunch. BYD just overtook Tesla in the UK market with aggressive pricing that legacy automakers can’t match. Chinese EV makers develop new vehicles in 18 months compared to five years for Western rivals. They’re not winning because of subsidies—they’re winning because they’ve built actual competitive advantages in manufacturing efficiency and vertical integration.

South Korea’s subsidy increase is a band-aid on a bullet wound. It might keep domestic EV sales from cratering in 2026, but it doesn’t solve the fundamental problem: Korean automakers are caught between U.S. protectionism, Chinese competition, and the end of the subsidy-fueled EV boom that artificially inflated demand for years.

The real question isn’t whether South Korea should boost subsidies—it’s whether any amount of government support can save traditional automakers from the structural changes reshaping the global auto industry. Based on everything we’ve documented this year, the answer is increasingly looking like “no.”

What do you think? Share your thoughts in the comments below.