"US Inflation Reduction Act Presents Opportunities for Domestic Secondary Battery Industry... Overcoming Challenges Possible"

Hyundai Motor Securities Report

[Asia Economy Reporter Myunghwan Lee] Ahead of the implementation of the U.S. Inflation Reduction Act (IRA), securities firms have analyzed that domestic secondary battery companies are expected to benefit. However, there is also a forecast that investment will be necessary to meet the subsidy eligibility requirements.

On the 3rd, Hyundai Motor Securities stated regarding the passage of the Inflation Reduction Act, "Time and investment are needed to meet the requirements, but it is sufficiently achievable."

According to the passage of the Inflation Reduction Act, to receive the full $7,500 tax credit benefit when purchasing an electric vehicle in the U.S., the final assembly of the finished vehicle must first be conducted in North America. Additionally, if the critical mineral requirement and battery component requirement are met, tax credit benefits of $3,750 each can be received. To receive the full tax credit benefits, both the critical mineral requirement and the battery component requirement must be satisfied.

Hyundai Motor Securities pointed out concerns that the burden of supply chain restructuring could increase, given the very high proportion of Chinese companies in the refining and processing of key minerals such as nickel and lithium in the secondary battery sector. They also noted that the scope of key mineral processing requirements is ambiguous.

However, Hyundai Motor Securities also highlighted positive factors of the Inflation Reduction Act for domestic secondary battery companies. The first positive factor is the prohibition clause on tax credit application for parts. Accordingly, it is expected to become more difficult for Chinese competitors to supply secondary batteries or related materials to U.S. local automakers.

The provision of tax credit benefits for investment in battery and related parts production facilities can also act positively. If battery cell and module production is carried out within the U.S., a tax credit benefit of $45 per kWh is granted, which is expected to offset some of the cost increase concerns due to supply chain restructuring, according to Hyundai Motor Securities' analysis.

Hyundai Motor Securities diagnosed that the Inflation Reduction Act will be a mid- to long-term opportunity factor for domestic secondary battery and related companies. Dongjin Kang, a researcher at Hyundai Motor Securities, said, "Time and investment will be needed to meet the requirements, but it is judged to be sufficiently achievable," adding, "Rather than excessive concerns, it is necessary to focus on the positive aspect that at least within the U.S., growth can be achieved while avoiding excessive competition with Chinese companies."

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