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Korean battery makers on high alert as U.S. moves to spike EV subsidies

Published: 26 May. 2025, 18:47

An LG Energy Solution factory in Michigan [LG ENERGY SOLUTION]

Korea’s battery industry is on edge after the U.S. House of Representatives passed a tax bill that would end EV subsidies as early as next year.

The development, feared since the advent of the current Donald Trump administration, raises concerns that the EV market plateau — known as the EV chasm — may persist.

Analysts say Korean firms must diversify into non-EV sectors like energy storage systems (ESS) and accelerate the development of mid- to low-priced products.

The bill, passed last Thursday, includes a provision to end the current $7,500 EV tax credit by the end of 2026 instead of 2032. Industry insiders predict that from 2027, higher consumer costs will likely slow EV adoption in the United States.

Still, many in the industry see the outcome as avoiding the worst-case scenario. Of particular concern to Korea’s big three battery makers — LG Energy Solution, Samsung SDI and SK On — is the Advanced Manufacturing Production Credit (AMPC) in the Inflation Reduction Act. Earlier forecasts suggested the AMPC could end in 2028, but the bill passed by the House shortens it only slightly, from the end of 2032 to the end of 2031.

Although industry officials had warned that a 2028 cutoff could cost Korean firms tens of trillions of won in lost subsidies, a one-year reduction is considered manageable.

Another variable in the bill is the Foreign Entity of Concern clause, which expands restrictions on AMPC eligibility, excluding companies that source components or minerals directly from Chinese suppliers.

“We already expected the $7,500 EV subsidy to be scrapped under a Trump administration, but decoupling supply chains from China has now become an urgent priority,” a battery cell executive said. “It won’t be easy to replace Chinese graphite anode materials quickly.”

The Samsung SDI booth at the InterBattery 2025 at Coex in southern Seoul last March [SAMSUNG SDI]

Among the four key battery components — cathodes, anodes, electrolytes and separators — China accounts for about 90 percent of global production of anodes and separators.

According to SNE Research, all of the top 10 anode suppliers last year were Chinese companies. Posco Future M, Korea’s only mass producer of anode materials, slipped from 10th to 11th place. Analysts predict that Korean material suppliers may benefit from U.S. trade barriers for Chinese rivals.

While the bill still requires Senate approval, most analysts expect it to pass without major changes. If so, Korean battery firms may be forced to revise their strategies.

Top of the list is the ESS sector, which is viewed as the most promising alternative to EVs. BloombergNEF data show that ESS battery demand was one-15th that of EV batteries in 2020 but grew to one-sixth last year. SK On moved its ESS division directly under the CEO late last year in a move to boost capacity.

“U.S. consumers are highly sensitive to subsidies, so the EV chasm will likely persist,” said a battery industry source. “But the ESS market has a positive outlook. Korean firms are practically the only ones with ESS manufacturing capability in the United States, so we are seeing a surge in inquiries.”

SK Battery America in Georgia [SK ON]

Companies are also eyeing emerging markets such as humanoid robots and urban air mobility. LG Energy Solution has partnered with Doosan Bobcat to develop batteries for compact construction equipment, while Samsung SDI is working with Hyundai Motor and Kia on robot-specific batteries.

As competition with China intensifies, Korean firms are being urged to speed up the development of more affordable battery types such as high-voltage mid-nickel, lithium iron phosphate and lithium manganese-rich batteries.

“In the current race with China, price now matters more than performance,” said Hwang Kyung-in, an associate research fellow at the Korea Institute for Industrial Economics and Trade. “Domestic battery makers need to accelerate the development of cost-effective products. Portfolio diversification is now urgent.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY CHOI SUN-EUL [[email protected]]