Delays in Delivering Korean Diesel Cars

The Ministry of Environment’s refusal to grant fuel emissions permission has brought to a halt OF the production of Kia’s new diesel car “Pride.” The ministry failed to produce a concrete reason for the refusal.

As a result, Kia Motors, the investor in equipment, and its suppliers have had to bear much pain, and about 1,000 orders for the new Pride are unfilled.

In fact, the government decided to allow the sale of diesel cars that meet “Euro 3 emission” standards (an environmental requirement concerning cars’ gas emissions) and above, starting this year. Pride is being manufactured according to “Euro 4” standards.

Initially, Kia planned to launch its diesel engine version of Pride around April 14.

Given the situation, other Korean auto makers planning for launches of diesel models after next month are likely to fall behind their schedules.

Meanwhile, imported diesel passenger vehicles have already obtained permission and are about to hit the market. Under the circumstances, another controversy of “reverse discrimination” would be expected.

An insider at Kia said, “Although the government mandates ‘Euro 3,’ standards to limit gas emissions, Pride satisfies ‘Euro 4’ standards (the higher level) in which emissions are halved. So we expected permission to be granted on April 14 as scheduled, and took orders for it.”

In response, the Environment Ministry’s environmental transportation policy head Kim Sang-bae explained, “It’s the first time for the ministry to issue this kind of permission to diesel cars. Thorough inspections keep us behind schedule,” adding, “We are not certain when the permission will be given.”

However, it was discovered that the real reason for the Environment Ministry’s foot dragging lay somewhere else.

A high official of the ministry said, “[To sell diesel cars in Korea], environmental groups argue that light oil prices have to reach as much as 75 percent of gasoline prices. But now it stands at 73 percent. Though the Finance Ministry needs to hurry to revise the tax law in order to raise light oil prices, the ministry has postponed introducing the bill due to inflation fears. That is where problems have arisen.”

In short, the Environment Ministry is not issuing gas emissions permission to satisfy environmentalists that are demanding hikes in light oil prices.

A point of contention is that the National Institute of Environmental Research (NIER), charged with granting emissions permissions to imported cars, has already handed out permission to two foreign auto manufacturers. The two companies will soon start selling their cars. One of the two models is a hand-operated version of Peugeot 407Hdi and the other is the Audi A6 3.0TDI. Both are produced to meet Euro 4 standards, just as the Pride is.

An employee in the automotive industry said, “The Environment Ministry is concerned about protests from environmental organizations due to the delay in passing the tax law revision bill. So the ministry is scapegoating Korean manufacturers. The government should compensate for the huge losses domestic makers will suffer.”

Joong-Hyun Park Tae-Hun Hwang sanjuck@donga.com beetlez@donga.com