South Korea's proposed Domestic Production Tax Credit, unveiled in the Ministry of Economy and Finance's 2026 tax reform proposal, would run from next year through 2036 and grant production-linked tax breaks to six sectors including secondary batteries, but not electric vehicles. The exclusion has alarmed automakers and battery makers, which argue it removes a key cost lever as Chinese-made EVs rapidly expand in South Korea. In the first half, Chinese-made EV registrations in South Korea rose 178.7% year on year to 69,513, lifting their market share to 35.0% from 26.8%. Tesla, which imports China-made vehicles into South Korea, sold 56,139 units in the first half, up 192.2%, including 43,359 Model Y SUVs, while BYD sold 11,675 units, up 807.9%. Hyundai Motor sold 39,575 units, up 46.5%, and Kia sold 72,078 units, up 151.1%. Officials said EVs were excluded because domestic production infrastructure is already in place, the market has matured and subsidies already exist, while support for batteries and other core components is intended to strengthen EV-industry competitiveness. Industry groups in both South Korea and the United States are warning about the broader rise of Chinese auto exports: the American International Automobile Dealers Association said it would support legislation to permanently restrict Chinese automakers from producing or selling vehicles in the U.S.