As IRA looms, Korea's battery makers rush to the U.S. [REWIND 2023]

U.S. President Joe Biden speaks before signing the Inflation Reduction Act in the White House in August 2022. [EPA/YONHAP]

The U.S. government, in early December, announced specific guidelines around the Inflation Reduction Act (IRA) restricting the use of battery components and critical minerals from China, stretching its influence on Korean battery makers.

To qualify for up to $7,500 in tax credits under the proposed guidelines, an eligible clean vehicle may not contain battery components that are manufactured or assembled in China. Starting in 2025, a vehicle may also not contain critical minerals that are extracted, processed, or recycled in the country.

Battery makers who are more than 25 percent owned by a Chinese company also cannot receive U.S. subsidies.

With just a few weeks until the law takes effect, Korea's major battery makers such as LG Energy Solution, Samsung SDI and SK On as well as materials firms like EcoPro and Posco Future M, are now in limbo. The majority of those companies have established 51:49 joint ventures with Chinese companies for key battery materials such as nickel, cathodes and battery precursors.

Korean battery makers, as a consequence, are rushing to build plants in the United States in an attempt to qualify for the IRA. They have funneled a total of 45 trillion won ($35 billion) to the United States through independent factories and joint ventures with global automakers.

BY SARAH CHEA [chea.sarah@joongang.co.kr]