South Korea has announced a $5.32 billion financial support package aimed at helping the country's battery makers invest in infrastructure in North America over the next five years.
The initiative is intended to help South Korean firms capitalize on the United States' Inflation Reduction Act, which requires automakers to source 50% of critical EV battery resources from the U.S. or a U.S. free-trade partner to qualify for new federal incentives.
South Korea's package will provide support through lowering lending rates, and insurance premiums cut by up to 20% and additional loans and tax credits for firms seeking to build battery and materials production facilities in North America.
The South Korean government will work on the initiative with the country's biggest battery cell makers and materials firms.
The new U.S. legislation has sparked some concern among auto manufacturers, particularly given that China dominates the global supply of many key raw materials used to make EV batteries.
South Korea has been particularly affected, with two-thirds of its cathode, anode and electrolyte materials sourced from China. However, several automakers are already reacting to the new requirements with new investment plans.
In March, South Korean battery maker LG Energy Solution announced that it would invest $5.6 billion into a stalled U.S. battery project in Arizona to qualify for the new federal incentives.
South Korea's LG Energy Solution Ltd, Samsung SDI Co Ltd and SK On together account for over a quarter of the global market of EV battery cell makers, with LG Energy Solution and Samsung SDI also among the top five.
As well as supplying Tesla, Volkswagen and General Motors, Korean companies have also been stepping up international expansion in recent months.
The South Korean government-backed battery alliance was launched last November to enable the country to better compete with China when sourcing essential resources to provide better stability for the battery supply chain.
South Korean Trade Minister Lee Chang-yang stressed, "Both the government and businessmen should cooperate to find solutions together to effectively cope with situations changing rapidly after the Inflation Reduction Act.”
While the recent U.S. policy addition has fueled some uncertainty during an already challenging time, the ongoing development of the electric vehicle industry is a strong driver of vitality and increased competition in the automotive sector