South Korea has taken a significant step towards boosting its battery industry, announcing that it will provide financial support of 7 trillion won (about $5.32 billion) for its battery makers over the next five years. The aim is to assist these companies in investing in infrastructure in North America and help them deal with the US Inflation Reduction Act, which was introduced by the US Treasury Department last week.
Under the new tax rules for electric vehicles (EVs), automakers must source a certain percentage of critical minerals for EV batteries from the United States or a US free-trade partner to qualify for new federal incentives. The Inflation Reduction Act requires 50% of the value of battery components to be produced or assembled in North America to qualify for a $3,750 credit, while 40% of the value of critical minerals sourced from the United States or a free-trade partner also qualifies for a $3,750 credit.
The South Korean government’s support for its battery industry includes a range of measures. These include lowering lending rates and insurance premiums by up to 20%, providing more loans and tax credits for Korean firms’ battery and material production facilities in North America, and helping to improve the supply chain of critical minerals, especially those dominated by China, to bolster battery supply chain stability.
Trade Minister Lee Chang-yang emphasized the importance of cooperation between the government and businesses to effectively deal with the rapidly changing situation after the Inflation Reduction Act. The government is committed to helping its battery industry adapt to the new tax rules and invest in infrastructure in North America.
South Korea’s LG Energy Solution Ltd (LGES), Samsung SDI Co Ltd, and SK On are the three largest EV battery cell makers in the world. They command over a quarter of the global market and supply major automakers such as Tesla, Volkswagen, and General Motors. In March, LGES announced that it would invest $5.6 billion in Arizona to resume a stalled US battery project, qualifying for federal incentives under the Inflation Reduction Act.
With South Korea’s latest financial support, its battery makers are better positioned to invest in infrastructure in North America and meet the US government’s requirements for EV incentives. This significant investment from South Korea is a major boost for its battery industry and could help strengthen its position in the global market.
