[Biden and Korean Companies] Expectations and Concerns Coexist... Corporate Investment Strategies in Uncertainty

[Our Survey of 20 Leading Companies by Industry]
New Government Announces Boost for Renewable Energy and Eco-friendly Vehicle Industries
Hanwha Accelerates Solar Power, Hyundai Motors Speeds Up Eco-friendly Vehicle Entry into US Market
Petrochemical and Steel Sectors Concerned over Carbon Border Tax Introduction
Pressure Increases for Expanded US Local Investment and Production

[Asia Economy Reporter Su-yeon Woo] The reason why major domestic conglomerates have not finalized their investment strategies in the United States is due to the coexistence of expectations and concerns about the Joe Biden administration, resulting in persistent uncertainty in the business environment. Companies are adopting a strategy to respond flexibly by monitoring the new administration’s initial policy directions and the pace of actual pledge implementation, but they also bear the burden of having to change plans in real time.

According to a survey conducted by Asia Economy on the 8th targeting 20 representative companies from major domestic industries, companies cited the most anticipated change after the launch of the Biden administration as the activation of eco-friendly industries such as automobiles, energy, and infrastructure (37.1%). This was followed by active economic stimulus measures (31.4%), easing of Trump-style trade measures such as Section 232 of the Trade Expansion Act (11.4%), and strengthened measures to prevent the spread of COVID-19 (11.4%).

◆Renewable Energy and Electric Vehicles, High Expectations for New Markets= Major domestic companies expect new opportunities to be created in the U.S. eco-friendly infrastructure sectors such as renewable energy, electric vehicles, and smart cities. From his first day in office, U.S. President Joe Biden declared rejoining the Paris Climate Agreement and is poised to drive forward eco-friendly policies. In the automotive sector, tax credits of up to $7,500 will be provided depending on the electric vehicle battery capacity, and state governments will also offer separate incentives for purchasing eco-friendly vehicles. Investments in charging infrastructure will be made in parallel, including the establishment of 500,000 eco-friendly vehicle charging stations across the U.S. by the end of 2030.

Hyundai Motor Group expects to directly benefit from the U.S. policies promoting the expansion of eco-friendly vehicles. Hyundai plans to reorganize its eco-friendly lineup in the U.S. market to 10 main models by the end of next year and consecutively launch new vehicles based on the dedicated electric vehicle platform (E-GMP). The strategy aims to achieve sales of 1 million electric vehicles by 2025 and secure a 10% global market share by preempting the U.S. eco-friendly vehicle market.

The Biden administration plans to steadily increase the share of wind power, which accounted for only 7% of U.S. electricity demand as of last year, to 35% by 2050 in the renewable energy sector. To encourage renewable energy generation, it is implementing active policies such as providing subsidies and offering a 30% tax credit on facility investments to promote the transition to renewable energy.

Among domestic companies, Hanwha Group is the most proactive in the renewable energy business. Hanwha Solutions, which holds the No. 1 market share in the U.S. solar module market, recently secured funds for new market investments through a paid-in capital increase worth 1.4 trillion KRW and announced a mid-to-long-term plan to invest 2.8 trillion KRW in this sector over five years. Additionally, Hanwha Energy is expected to create synergy among affiliates in the solar energy field through a joint venture established in the U.S. with French oil company Total.

◆Concerns Over Anti-Business Policies... Increased Pressure to Attract U.S. Investment= Companies cited the most concerning issues after the launch of the Biden administration as strengthened eco-friendly, pro-labor, and consumer protection policies (25.9%), followed by strengthened U.S. protectionism (22.2%), increased pressure to attract investment within the U.S. (18.5%), and changes in the global value chain (supply chain) (14.8%).

The Biden administration’s ‘Green New Deal’ stance is a double-edged sword for Korean companies. While it provides opportunities to pioneer new markets, it may also result in further regulatory tightening for companies already operating in the U.S. The introduction of a carbon border tax by the U.S. will inevitably have direct and indirect impacts on sectors with high energy consumption and trade dependence such as cement, petrochemicals, steel, and semiconductors.

Although the Trump administration’s aggressive protectionist measures such as Section 232 of the Trade Expansion Act are expected to be eased, the prevailing view is that the Biden administration will maintain a protectionist stance for the time being. The ‘Buy America’ policy also demonstrates the Biden administration’s strong commitment to revitalizing U.S. manufacturing.

From the perspective of protecting domestic manufacturing and revitalizing employment, pressure to attract investment within the U.S. is expected to intensify. As the burden to expand local production increases, the possibility of higher factory operating costs due to strengthened pro-labor policies, including labor costs, cannot be ruled out. Recently, Samsung Electronics has been negotiating with multiple federal governments while weighing investments in semiconductor plants in the U.S., and Hyundai Motor is also increasing its local production ratio by deciding to produce the new Tucson, its main model, in the U.S.

A major conglomerate that responded to the survey said, "Pressure has increased due to the strengthening of the U.S. domestic production system, including the expansion of local production facilities and procurement systems," adding, "Companies face the challenge of actively responding to changes in the global supply chain, including raw material procurement, product manufacturing, and sales and services."

This content was produced with the assistance of AI translation services.