South Korea plans to extend the current 30% sales tax discount on vehicles until the end of the year to help support the country’s vehicle market, according to local reports.

The discount, which reduces the sales tax from 5% to 3.5%, was originally introduced in July 2018 but the government has continued to extend it to support domestic vehicle demand. It is currently due to expire at the end of June 2021.

Finance minister Hong Nam-ki was reported to have announced the plan to extend the discount for another six months to local journalists on Friday, citing continued weak vehicle demand due to the COVID-19 pandemic.

Vehicle sales in the country, including imports, increased by almost 6% to 1.89m units last year. Domestic sales increased by 3.5 % to 494,178 units in the first four months of 2021, while sales of imported vehicles jumped by over 25% to 98,980 units.

Global vehicle manufacturers have struggled with an acute shortage of semiconductors in the last six months, including domestic manufacturers Hyundai Motor, Kia Corporation and GM Korea which have been forced to cut production in recent months.

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By GlobalData