The U.S. Department of the Treasury announced that countries other than the United States and its FTA partners may be added to the Inflation Reduction Act as places of production eligible for U.S. electric vehicle (EV) subsidies. This means South Korean EV battery manufacturers’ more leeway regarding supply chain management.
Those companies procure key EV battery minerals such as nickel and lithium from the FTA partners including Canada, Australia and Chile and the others including Indonesia and Argentina. For example, LG Energy Solution, LG Chem and POSCO are building a plant in Indonesia for nickel procurement and SK On and EcoPro are building a precursor plant in Indonesia. POSCO Group is increasing investment in Argentina for lithium procurement.
According to the department, even an EV using a mineral extracted in a non-partner country is eligible for the subsidy if the mineral is processed in a partner country and an added value of at least 50 percent is created as a result of the processing. In other words, a company can get the subsidy by extracting a mineral in China and then processing it in South Korea, Chile, or the like.
Under the circumstances, Chinese EV battery manufacturers are planning to enter the South Korean market. For example, GEM had meetings last month with several South Korean battery material companies regarding precursor plant operation in South Korea.
