[US Midterm Elections] Battery Industry Faces Inevitable Acceleration Due to IRA-Induced Supply Chain Changes

Two-Track Strategy Including Demand for Bill Postponement

Changes in the battery industry's supply chain are inevitable depending on the results of the U.S. midterm elections. Although the Republican Party has taken control of the House, the balance of power in Congress is maintained due to the strong performance of the Democratic Party, leading to the judgment that the implementation of the Inflation Reduction Act (IRA) will be unstoppable. However, since the Republican Party advocates for amendments to the Inflation Reduction Act, there is a mood of pursuing a 'two-track strategy' that demands application deferrals while accelerating supply chain diversification.

On the 10th, a battery industry official said, "Regardless of how the power in the U.S. Congress changes, the supply chain reorganization led by the U.S. is an unstoppable trend," adding, "While some details of the Inflation Reduction Act need to be clarified, it is clear from a corporate perspective that full efforts must be made to diversify the supply chain."

Another official said, "Although investment centered on North America is somewhat burdensome, the electric vehicle market is growing rapidly, and the scale of tax credits for advanced manufacturing sectors is large, making North American investment attractive."

The Inflation Reduction Act includes provisions that completely exclude tax credit benefits if electric vehicle battery minerals or components from 'concerned countries' such as China and Russia are included. It specifies that battery minerals such as lithium and nickel must be mined and processed in countries that have free trade agreements (FTA) with the U.S. or recycled in the North American region to receive up to half of the maximum subsidy ($3,750, approximately 5.11 million KRW). The required ratio for receiving subsidies starts at 40% next year and must increase to 80% by 2027.

In fact, domestic battery companies have rushed to secure minerals such as lithium and nickel, which are key battery materials. These minerals have been areas where China’s influence was significant throughout the entire supply chain process, including mining and refining. As the enactment of the Inflation Reduction Act became more visible in the second half of this year, domestic battery companies have been strengthening cooperation with mineral companies in countries excluding China, such as Australia, South America, and Africa.

Tax credits are the reason battery manufacturers are accelerating their investments in the U.S. It is analyzed that they will benefit from the trillion-dollar-scale Advanced Manufacturing Production Tax Credit (AMPC) within the U.S. According to the relevant tax credit clause (Section 45X) of the Inflation Reduction Act, battery manufacturers will receive tax credit benefits of about $35 (approximately 48,541 KRW) per kWh based on cells as early as next year. The three domestic battery companies plan to produce 430 GWh of batteries starting in 2025. Considering this, battery companies could receive up to $15.05 billion (approximately 20.91 trillion KRW) in tax credits annually from 2025. These tax credit benefits will continue until 2032.

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