A lithium-ion battery for electric vehicles (EV) manufactured by REPT is pictured at the 2024 Paris Auto Show in Paris, France, October 15, 2024. REUTERS/Benoit Tessier
Seoul: With the US presidential election just around the corner, South Korean battery companies are bracing for change as the result could have significant effects on the industry, particularly if Republican candidate Donald Trump wins.
South Korea’s leading battery producers – LG Energy Solution, Samsung SDI and SK On – have depended on the Advanced Manufacturing Production Credit (AMPC) under the Biden administration’s Inflation Reduction Act (IRA) for operating profits.
According to the quarterly earnings reports of LG Energy Solution and Samsung SDI, the former has received around 1.1 trillion won or about US$797mil in the US AMPC benefits while the latter was handed 64.9 billion won in the first three quarters of this year.
SK On, which will release its third-quarter earnings result today, has garnered 150.4 billion won in AMPC incentives between January and June this year.
“Trump has openly indicated that he will scrap the IRA if elected through many speeches, but that would not be easy in reality,” said an official at a South Korean battery firm.
“In order to change the IRA regulations and guidelines, the Department of the Treasury has to take action. If Trump’s executive branch tries to switch the rules, it could take matters to court. And what’s more is that IRA loans and subsidies have either been handed out or signed between the involved parties.”
The official added that Trump will need support from the Senate to “scrap” the IRA but a number of Republican senators openly support the special law to boost manufacturing on American soil, highlighting that South Korean battery makers either have built plants in red states or are setting up production footholds that will aid the local economy.
Another source at a battery firm pointed out that the level of benefit from the IRA could be readjusted if there is a second Trump administration.
“The support for electrification of the automotive industry is likely to be less than what it is now with the current government, meaning that drivers may not be able to enjoy price benefits so much,” said the source.
“It might be difficult to bring up the penetration rate of electric vehicles (EVs).”
An industry source also noted that the battery firms’ investment commitments are expected to be carried out as planned, adding that they will have to be flexible as they respond to possible changes in US policies.
The Korea Institute for Industrial Economics and Trade (KIET) wrote in a report released on Oct 7 that a second Trump administration would slow down the growth of the US EV market, causing South Korean battery makers to cut down their American investments.
The KIET report, however, underlined that Trump’s leadership will further intensify Washington’s anti-China trade policies so South Korean battery firms need to prepare to diversify and internalise supply chains. — The Korea Herald/ANN
