Trump vow to 'revoke the EV mandate' sends Hyundai, LG Energy shares tumbling

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Trump vow to 'revoke the EV mandate' sends Hyundai, LG Energy shares tumbling

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U.S. President Donald Trump signs numerous executive orders on the first day of his presidency on Jan. 20. [EPA/YONHAP]

U.S. President Donald Trump signs numerous executive orders on the first day of his presidency on Jan. 20. [EPA/YONHAP]

 
Shares of Korea’s EV-related companies toppled on Tuesday after U.S. President Donald Trump issued a flurry of executive orders aiming to end Biden's EV mandates and eliminate “unfair subsidies” to Korean manufacturers on his first day in office. 
 
Alongside a withdrawal from the Paris Climate Agreement, the new president also threatened a complete “overhaul” of the trade system, though he did not specify details of the previously threatened blanket tariffs of up to 20 percent that could directly shake up Korea's export-driven economy.
 

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LG Energy Solution, the largest battery maker in Korea, slid 4.32 percent to close at 354,500 won on Tuesday, while Samsung SDI sank 3.9 percent to 234,000 won. SK Innovation, the parent company of SK On, declined 3.7 percent to 124,600 won.
 
The Kosdaq-listed EcoPro, a battery materials producer, fell 5.9 percent to 60,900 while its cathode materials subsidiary, EcoPro BM, tumbled 8.62 percent to 11,900 won.
 
U.S. President Donald Trump signs numerous executive orders on the first day of his presidency on Jan. 20. [EPA/YONHAP]

U.S. President Donald Trump signs numerous executive orders on the first day of his presidency on Jan. 20. [EPA/YONHAP]

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The drastic plummet came in line with Trump’s remarks that he would “end the Green New Deal and revoke the EV mandate” to “save U.S. auto industry” during his inauguration speech on Monday in Washington.
 
His termination of the Green New Deal includes consideration of “unfair subsidies” and other “ill-conceived government-imposed market distortions that favor EVs.” He also ordered all agencies to “pause the disbursement of funds appropriated through the Inflation Reduction Act, including, but not limited to, funds for EV charging stations.”
 
End of bounty subsidies
Korean EV producers have been major beneficiaries of Biden-era climate policies, which offered generous subsidies that eventually helped them mitigate massive losses.
 
“Trump’s exit from the climate policies increased worries over Chinese EVs and batteries getting a more competitive edge in the global market,” said Cho Yeon-ju, a researcher at NH Investment & Securities.
 
“Concerns over Trump pushing for extreme rules on his first day of presidency have relieved a bit, but a very highly variable stock market is expected for a while, agitated by Trump’s policies.”
 
The U.S. Advanced Manufacturing Production Credit under the IRA grants $35 per kilowatt-hour for cells and $45 for modules. LG Energy Solution reflected roughly 676.8 billion won for the credits in 2023, around 31.3 percent of its total annual operating profit.  
 
Hyundai Motor shares also edged down 0.96 percent on Tuesday following reports that the U.S. Energy Department had excluded three Hyundai Motor EV models — the Ioniq 5, the Ioniq 9 and the EV version of the GV70 — from the list of EVs eligible for up to $7,500 in tax credits due to their Chinese parts. 
 
The Korean automaker has said those models will qualify for the subsidy in the second quarter, but the destiny of the credits is now up in the air as Trump attempts to abandon subsidies advantageous to foreign companies. Hyundai Motor has made a substantial $16 billion investment in the United States over the past four years, which concentrated on EVs and related areas.
 
Buoyed energy, shipbuilding
Investment sentiment for shipbuilding and gas plant builders buoyed in Korea on Tuesday on the heels of Donald Trump’s inauguration. The sectors could receive a boost from the new leader’s push for fossil fuel energy including liquefied natural gas (LNG).
 
The U.S. president described oil and gas as “liquid gold,” vowing to lift a Biden-era moratorium on licenses of LNG export projects.
 
A liquefied natural gas floating storage and regasification unit built by Hanwha Ocean [HANWHA OCEAN]

A liquefied natural gas floating storage and regasification unit built by Hanwha Ocean [HANWHA OCEAN]

While the immediate beneficiaries will be U.S. energy giants like Cheniere Energy, Korean companies making LNG vessels and plants enjoyed optimistic prospects linked to the expansion of U.S. energy exports.
 
The share prices of the country’s largest shipbuilders all jumped on Tuesday. HD Hyundai Heavy Industries surged 6 percent to close at 327,000 won on Tuesday and Hanwha Ocean rose 5.6 percent. Samsung Heavy Industries rose 1.33 percent.
 
Analysts predict that the portion LNG makes up of those companies’ sales will continue to grow.
 
Seo Jae-ho, an analyst at DB Financial Investment, projected that LNG carriers will take up 70 percent of Hanwha Ocean's sales this year.
 
More contracts for the maintenance, repair and overhaul of U.S. Navy vessels also remain a bright spot for Korean shipbuilders. Trump specifically praised Korean’s firms shipbuilding capabilities last November.
 
Samsung E&A, Samsung’s plant-building affiliate carrying out an LNG terminal project in Texas, jumped 3.24 percent on Tuesday.
 
“Given the increased exports of U.S. LNG, the firms related to LNG projects or trading could benefit,” said Lee Sang-heon, an analyst at iM Securities.
 
The Korean government plans to increase its imports of oil and gas to lessen its trade surplus with the world’s biggest economy and diversify energy sources.
 
Korea Gas Corp., the country’s state-run gas supplier that ranks among the largest LNG buyers in the world, has selected multiple U.S. companies to source LNG in a major shift away from the Middle East.
 
Acting swiftly 
Acting President Choi Sang-mok pledged an immediate response to the forewarned U.S. measures, highlighting the significance of a strong U.S.-Korea economic partnership.
 
“The government will maximize the opportunities presented with the inauguration of the new U.S. administration and minimize any risk factors to bolster the stability of the Korean economy,” said Choi said during a ministerial meeting on international economic affairs on Tuesday. 
 
Choi noted that the newly inaugurated president had “reiterated the ‘America First’ theme in his inaugural speech,” adding that Trump’s policy plans — such as establishing an External Revenue Service, imposing higher tariffs and rolling back Green New Deal initiatives — would have both direct and indirect impacts on the Korean economy.
 
Korea’s exports to the United States have been growing steadily, having reached records every year since 2018, and hit $127.8 billion last year, up 10.5 percent on year.
 
With the country’s trade surplus also soaring to a fresh high of $55.7 billion, a 25 percent jump from a year earlier, the steep surge could make Korea a bigger target for the Trump administration.
 
Trump signed an order enabling the U.S. trade representative to review existing trade agreements and recommend revisions “to achieve or maintain the general level of reciprocal and mutually advantageous concessions,” meaning the FTA between the United States and Korea is likely to come under scrutiny as well.
 
“The government has been organizing a structured response plan prioritizing Korea’s national interests since before the U.S. election,” the acting president said.
 
To ensure close communication with the U.S. government, a delegation has been sent to Washington to monitor forthcoming policy measures. Choi, along with other senior government officials, also plans to directly engage with the administration, according to the acting president.
 
The Ministry of Trade, Industry and Energy convened a separate meeting with representatives of both the government and the private sector present to discuss the potential implications of Trump’s newly signed executive orders and other policy proposals.
 
The ministry plans to bolster its monitoring system and work closely with the private sector to mitigate the impact of any potential fallout on Korean businesses’ operations.
 

BY SARAH CHEA, PARK EUN-JEE AND SHIN HA-NEE [[email protected]]
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