South Korea will provide 7 trillion won ($5.3 billion) of financial support over the coming five years for local battery makers that are seeking to build plants in North America, a response to President Joe Biden’s historic climate bill that encourages electric car production in the US and the sourcing of EV supply chain components outside of China.
(Bloomberg) — South Korea will provide 7 trillion won ($5.3 billion) of financial support over the coming five years for local battery makers that are seeking to build plants in North America, a response to President Joe Biden’s historic climate bill that encourages electric car production in the US and the sourcing of EV supply chain components outside of China.
The support includes lowering lending rates and insurance premiums by up to 20% as well as providing more loans and tax credits for battery and material production complexes, according to an e-mailed statement from Korea’s trade ministry Friday.
“To effectively cope with situations changing rapidly after the Inflation Reduction Act, both the government and businessmen should cooperate to find solutions together,” South Korea’s Trade Minister Lee Chang-yang said.
Biden’s Inflation Reducion Act encourages automakers to assemble electric vehicles in North America and reduce reliance on Chinese minerals and components in order to be eligible for a $7,500-a-car subsidy. Korea is a home to three of world’s leading battery makers, LG Energy Solution Ltd., Samsung SDI Co. and SK On Co. Together they supply most of the big automakers including General Motors Co., Ford Motor Co. and Tesla Inc.
Read more: LG Energy Solution Profit Exceeds Estimates on US Tax Credit
Shares of Korean battery-materials stocks jumped earlier this week following detailed guidance around the IRA, which Korea’s trade ministry sees as an opportunity, citing a relaxed requirement on processing minerals.
What BloombergNEF says:
Automakers must meet both critical mineral and battery component requirements for their models to receive the full $7,500 credit. If these new rules were in place last year, 58-72% of the nearly 1 million EVs sold in the US would have qualified for at least half the credit. Treasury’s guidance opens a pathway for more countries to enter into agreements with the US to have their materials qualify under the critical minerals requirement.
The law still demands battery makers increase supplies of minerals and components outside “foreign entities of concerns,” assumed to be China, by 2029. Korean battery firms have been heavily reliant on metals mined and processed in China, especially graphite, because of low prices.
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