Chinese electric buses continue to strengthen their presence in the domestic market, reaching a point last year where they constituted over half of the total market share. In an attempt to curb the influence of Chinese buses, the Korean government slashed subsidies by around 50%. Nevertheless, the policy had limited impact, as Chinese buses remained significantly cheaper than their domestically manufactured counterparts.
According to the Ministry of Land, Infrastructure and Transport and the Korea Automobile & Mobility Association (KAMA), a total of 2,815 electric buses were sold in the domestic market last year. Chinese-made buses constituted 54.1% with 1,522 units, while domestically produced buses accounted for 1,293 units, or 45.9%. The market share of Chinese electric buses in the domestic market was 23.9% in 2019, but it saw a consistent annual increase, reaching 38% in 2021 and 42% in 2022.
The affordability of Chinese electric buses stands out as a notable advantage. Low-floor buses, with a reduced distance between the ground and vehicle floor, are domestically priced between 400 to 500 million won. In contrast, Chinese-made buses are reported to be in the 300 million won range. These low-floor electric buses are eligible for subsidies from both the government and local authorities. The bus industry explains that, with these subsidies, the purchase cost of Chinese buses becomes approximately half that of domestically produced ones.
Last year, the government revised subsidy payment criteria to curb the prevalence of Chinese-made electric buses. Subsidies were categorized into performance subsidies (up to a maximum of 67 million won) and safety subsidies (3 million won), each with specific conditions.
Performance subsidies are granted in full if the battery energy density exceeds 500Wh per liter, 80% for 450Wh to less than 500Wh, and 70% for less than 400Wh. This adjustment takes into consideration the predominant use of lithium iron phosphate (LFP) batteries in Chinese electric buses, which have an energy density below 400Wh.
Safety subsidies are contingent on factors such as the operation of directly managed service centers and the presence of a computer system. If a collaborated service center is operated instead of a directly managed one, a 10% reduction in subsidies occurs. Furthermore, if there is no computer system, 80% of the total subsidy is provided.
Due to this, subsidies for Chinese-made electric buses saw an approximately 50% reduction compared to the previous year. However, bus sales continued to rise. The domestic bus industry asserts that Chinese buses, despite receiving fewer subsidies, are still more cost-effective, and there is not a significant difference in driving range compared to domestically produced buses.
An industry insider said, “It appears challenging to curb the growth in market share for Chinese electric buses unless subsidies for them are completely eliminated. Even if domestic companies try to equip their buses with affordable LFP batteries to enhance price competitiveness, the situation remains difficult due to subsidy reductions.”
