US to End Dependence on Chinese Battery Materials with $4 Trillion Subsidy Support (Comprehensive)

President Joe Biden of the United States. [Image source=Yonhap News]

[Asia Economy Reporter Lee Ji-eun] The U.S. Biden administration has announced plans to provide $2.8 billion in subsidies to promote domestic production of electric vehicle (EV) battery raw materials and strengthen battery supply chains with allied countries. As the technological hegemony competition with China intensifies, this move is interpreted as a reorganization of a domestic-centered production system to reduce dependence on China for battery raw materials. As the U.S. accelerates the restructuring of critical mineral supply chains centered on its allies, South Korea is also expected to respond accordingly.

◆ Production of Lithium for 2 Million EVs... Subsidies for Raw Material Production to 20 Companies

On the 19th (local time), the White House stated, "Based on the Department of Energy Infrastructure Act, $2.8 billion (approximately 4 trillion KRW) will be provided to 20 manufacturers in 12 U.S. states," adding, "When combined with budgets from the Semiconductor Support Act, the Inflation Reduction Act (IRA), and the Bipartisan Infrastructure Law, more than $135 billion will be invested in the U.S. electric vehicle industry."

The funds provided by the Department of Energy will be matched with private capital from companies, increasing the total to $9 billion, which will be invested in developing and producing EV battery raw materials such as graphite and lithium. According to the White House, the subsidies will benefit Georgia, Alabama, Kentucky, Louisiana, Nevada, New York, North Carolina, North Dakota, Ohio, Tennessee, Washington, and Missouri.

The White House expects that this investment will enable the production of lithium for batteries sufficient for 2 million EVs annually, graphite for 1.2 million EVs, and nickel for 400,000 EVs per year.

Through this project, the U.S. government plans to establish large-scale commercial lithium electrolyte salt production facilities in the U.S. and develop electrode binder facilities capable of meeting 45% of domestic EV battery binder demand by 2030. The first commercial silicon oxide production facility in the U.S. will also be built to supply cathode materials, a key component, for 600,000 EV batteries annually.

The White House cited that since President Biden took office, U.S. EV sales have tripled, stating, "Demand for key minerals such as lithium and graphite will increase to meet future EV demand, and this project will act as a catalyst for the entire U.S. industry." Additionally, the White House set a goal to raise the share of EVs among all new vehicles produced by 2030 to half.

Jennifer Granholm, Secretary of Energy, said in a statement, "Producing advanced batteries and components domestically will increase demand for EVs and accelerate the industrial transition away from fossil fuels," adding, "This will create more well-paying jobs across the U.S." The White House projects that this investment will create a total of 8,000 jobs.

Foreign media explained that this measure sends a positive signal to the market amid challenges faced by the finished vehicle and battery industries due to China's expanding market dominance and the Inflation Reduction Act. Due to the IRA, from next year, automakers must source over 40% of key minerals used in batteries from North America or countries with which the U.S. has free trade agreements (FTA) to qualify for subsidies.

The Wall Street Journal noted, "Building facilities for mineral production takes a long time, so automakers have complained about the IRA's tax credit benefits being tied to using materials sourced from the U.S.," adding, "They are responding positively to policies providing subsidies to revitalize the mineral industry."

◆ "Cooperation with Allies, Strengthening Energy Security"... Announcement of U.S.-Made Battery Raw Materials Initiative

Alongside this, President Biden announced a whole-of-government 'U.S.-Made Battery Raw Materials Initiative' to secure critical minerals for EVs stably.

Led by the White House Coordination Committee and involving the Departments of Energy, Interior, and State, this initiative includes plans to strengthen critical mineral supply chains and energy security by partnering with global partners and allies through the Global Partnership for Infrastructure and Investment (PGII).

PGII is an expanded version of the 'Build Back Better World (B3W)' initiative unveiled by the U.S. at the G7 summit in June, aiming to invest $600 billion in infrastructure projects in developing countries by 2027. It is regarded as a policy targeting China's Belt and Road Initiative.

The White House explained that, together with partner allies, it will locate battery resource deposits, diversify global supply chains, and raise labor standards related to mineral mining. The Biden administration plans to make diplomatic efforts to establish a continuous mineral supply chain and support research to process minerals while minimizing environmental pollution.

Moreover, the White House clearly stated its intention to reduce resource dependence on China through this initiative. It emphasized that only by strengthening supply chain ties with reliable allies can the U.S. enhance its economic security.

The White House said, "Currently, China controls a significant portion of the critical mineral supply chain," adding, "If the U.S. does not develop capabilities in mining, processing, and recycling, EV development will be hindered, ultimately resulting in reliance on unreliable foreign supply chains."

Earlier, in April, President Biden invoked the Defense Production Act (DPA) to reduce dependence on China for essential minerals and announced funding support for U.S. companies producing lithium, nickel, and others. To diversify mineral supply chains dominated by China, the U.S. launched the 'Critical Minerals Security Partnership,' a multilateral cooperation body involving 11 countries including South Korea and Japan, in June.

A senior U.S. government official told major foreign media, "The global economy is shifting from fossil fuels to clean energy," adding, "In this situation, we cannot rely on China for key mineral production as we once relied on dictator Vladimir Putin's oil."

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