SEOUL – South Korean companies are reconsidering their US$54 billion (S$72.5 billion) investment blitz to build electric vehicle (EV) battery plants in the United States, over concerns that President-elect Donald Trump could undo tax credits for EVs.
Some firms have slowed or hit the pause button on any ongoing construction of some plants because they are wary about reduced demand for EVs and what Trump would do during a second term in the White House, people familiar with the matter said, asking not to be identified due to the sensitivity of the issue.
Posco Future M, which makes cathodes for General Motors (GM), said in a filing in September that it is delaying the completion of its plant in Quebec, Canada, due to “local conditions”.
Although companies have not taken any action yet, many are “anxious” about to what degree Trump would slash government incentives for the EV market, said Mr Kenny Kim, chief executive officer at SNE Research, a Seoul-based research firm that focuses on Korean battery makers.
Trump has long criticised President Joe Biden’s efforts to subsidise EVs through his landmark energy Bill, the Inflation Reduction Act (IRA). The incoming administration is looking to slash fuel efficiency requirements and, according to a Reuters report in November, could eliminate the key US$7,500 consumer tax credit.
Ending hundreds of billions of dollars in subsidies, tax credits and other incentives would threaten tens of thousands of US jobs and undo years of work shifting the global EV supply chain away from China. It could also hit the earnings of Korean firms, key US partners in the effort to reduce reliance on Chinese suppliers, at a time when they are already suffering from weaker demand for EVs and falling battery prices.
“We are paying attention to every single word from Trump” about EVs, said Mr Kim Byeong-hoon, CEO at Ecopro Materials, a supplier of precursor materials for the EV batteries used by Ford Motor and GM.
“We have considered the Inflation Reduction Act as a very important issue so far,” he added. “If there’s any change in the policy, we may have to change our strategy too.”
The Biden administration last week offered US$7.5 billion to help finance a joint venture between Samsung SDI and Stellantis to create cell manufacturing plants in Indiana.
However, the Trump transition team was quick to call the offer into question. Mr Vivek Ramaswamy, one of the two nominated co-chairs of Trump’s soon-to-be Department of Government Efficiency, said in a post on X that the department would scrutinise the facility.
South Korea’s three largest battery makers – Samsung SDI, LG Energy Solution and SK On – have announced 15 battery plants in the US, the most aggressive investment drive of any of the world’s three major battery hubs – China, Japan and South Korea.
Half of the Korean plants were announced after the IRA was signed in 2022, promising to create over 20,000 jobs, located largely in the so-called “battery belt”, which stretches from Michigan through Ohio and Kentucky to Georgia.
“South Korea has contributed to creating jobs and investments in the Rust Belt,” said Mr Park Tae-sung, vice-chairman at the Korea Battery Industry Association.
Having Korean battery suppliers is also beneficial for the US to win in the competition against China-dominated supply chains for EVs, he added, noting that the group is in talks with the US authorities to lobby to keep the credits.
EV batteries accounted for about half of all the foreign direct investment (FDI) and reshoring from overseas in the US between 2021 and the first quarter of 2024, according to Reshoring Initiative. Korean FDI and reshoring in the US created 20,360 jobs in North America in 2023, more than any other country, the data show.
Cutting tax credits would hit Korean battery companies hard at a time when they are suffering from weaker demand for EVs. Prices of lithium, a key mineral tied to the selling price of an EV battery, plunged nearly 90 per cent from their highs in 2022 due to slower-than-expected adoption of EVs.
LG Energy Solution, a key partner of GM, booked about 1 trillion won (S$943 million) of IRA credits in its accounts so far this year, but analysts expect a net loss for the fiscal year of 2023. SK On, the partner of Ford, also received about 211 billion won in tax credits from the US during the first three quarters, yet still reported an operating loss during the period. BLOOMBERG
GM will sell stake in EV battery plant to its partner LGStellantis and Samsung will get $9.4 billion to build battery factories in US
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South KoreaElectric and hybrid vehiclesInvestmentDonald Trump
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