Korean EV, battery makers in holding pattern with Trump's win

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Korean EV, battery makers in holding pattern with Trump's win

Published: 06 Nov. 2024, 18:27 Updated: 06 Nov. 2024, 20:53

SARAH CHEA
[email protected]

Republican presidential candidate Donald Trump speaks at an election night watch party in West Palm Beach, Florida, on Wednesday. [AP/YONHAP]

[NEWS IN FOCUS]

Former President Donald Trump’s victory in the U.S. presidential election has forced Korean EV and battery makers into an uneasy holding pattern as their bottom lines face a potential threat with the Republican nominee's expected attempt to slash incentives for clean vehicle-related investments.

Trump's once-crystal clear tenacity to boost fossil fuels over clean energy with open hostility toward EVs has wavered as of late on an endorsement by Tesla CEO Elon Musk.

Still, Korean firms are determined to stick to their announced investment plans in the United States, betting big on the hope of a rebound in EV sales and gaining competitiveness over Chinese players.

“SK On is bent on expanding U.S. investment regardless of the election results to jump on the bandwagon to contain China, though uncertainties are looming over the downsizing of the Inflation Reduction Act [IRA] in Trump’s second term,” said David Jun, vice president of SK On’s Investor Relations department, in a recent conference call on third quarter earnings.

The IRA, passed in 2022 by President Joe Biden, funneled $260 billion in incentives for a clean energy transition, including up to $7,500 in tax credits on purchases of EVs assembled in North America. The IRA's Advanced Manufacturing Production Credit (AMPC) also offers $35 per kilowatt-hour for battery cells and $45 for battery modules, which have saved Korean battery makers from falling into losses amid slumping EV sales.

“The entire repeal of the law is less likely to happen as some lawmakers in states considered Republican strongholds have recently voiced opposition to the IRA's abolishment,” Jun said. “The impact on SK On could be limited.”

Tesla CEO Elon Musk speaks before Republican presidential nominee Donald Trump at a campaign rally in New York on Oct. 27. [AP/YONHAP]

Georgia, led by Republican Brian Kemp, has $15.3 billion in IRA-linked projects to constitute the most concentrated Korean auto investment. The state of Indiana, where three battery plants of Samsung SDI are located, is governed by Republican Eric Holcomb while Republican Bill Lee occupies the office in Tennessee.

Indiana Secretary of Commerce David Rosenberg also predicted minimal effects on incentives for Korean companies “as the programs are already enacted" and decisions have already been made by the U.S. government, during an interview with the Korea JoongAng Daily last month.

LG Energy Solution, Korea’s largest battery maker, also said it will push forward with the necessary investment in North America considering various anticipated circumstances such as the scheduled launch of new EVs by client automakers.

“With the IRA requiring a strict process and political consensus, the AMPC benefits will be maintained in a broad framework,” said Kang Chang-beom, a chief strategy officer at LG Energy Solution. “The policy package aimed at containing China will surely be tightened no matter who wins, and LG’s position in the U.S. battery market will have to be solidified."

Korea’s keen eye on the possibility of a Trump win came in the wake of the former president's proclamations that climate change is a “hoax," vowing to end the EV mandate on Day 1 of his presidency and shred the IRA, which he said will “spell the death” of the U.S. automotive industry.

In fact, Trump aggressively rolled back some 130 energy policies aimed at cutting greenhouse gas emissions during his four years in office.

Backed by Biden’s climate projects, Korea was the top investor in the United States last year, beating Taiwan and China, with commitments to around 90 large-scale projects totaling $21.5 billion last year alone.

Of Korea’s foreign direct investment, 44 percent was made in the United States last year, according to a report from the Korea International Trade Association.

Korean battery makers have a total of 17 plants operating or planned in the United States, 12 of which have been announced since Biden entered the Oval Office.

Hyundai Motor has invested $5.5 billion to build an EV manufacturing facility in Georgia, which started partial production in early October. The company is scheduled to upgrade the plant to set up a production line for hybrid vehicles to adjust to the unstable EV demand.

BY SARAH CHEA [[email protected]]