"US IRA Provides 19 Trillion Won Tax Benefits to Three Domestic Battery Companies"

Battery Alliance Industry Competitiveness Subcommittee Meeting

[Asia Economy Sejong=Reporter Dongwoo Lee] An analysis has emerged that the three domestic battery companies could receive tax benefits worth 19 trillion won due to the U.S. Inflation Reduction Act (IRA).

At the Battery Alliance Industrial Competitiveness Subcommittee meeting held by the Ministry of Trade, Industry and Energy on the 15th at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul, researcher Ianna from Yuanta Securities analyzed the IRA in this way. She explained that various incentives such as electric vehicle subsidies and tax credits will realize the potential of the U.S. electric vehicle market, leading to a sharp increase in demand for Korean batteries. The researcher said, "Currently, the electric vehicle penetration rate in the U.S. is only 4%, the lowest among the three major markets including the European Union (EU) and China," adding, "The low penetration rate means there is high growth potential."

She predicted that the share of the U.S. in global electric vehicle battery demand will increase to 44% by 2025. The researcher analyzed, "A significant portion of the increasing U.S. electric vehicle demand, driven by the IRA and other de-China supply chain policies, will be met through domestic battery companies," and "The market share of our companies in the U.S. is expected to rise from 26.5% last year to about 69% in 2025."

Accordingly, the three battery companies (LG Energy Solution, Samsung SDI, SK On) are expected to receive benefits worth 19 trillion won by 2025 by utilizing the advanced manufacturing production tax credit system. She said, "The total investment cost for the factories that the three battery companies plan to build in the U.S. by 2025 is estimated to be around 40 trillion won," and "It is expected that about half of the initial investment cost will be credited."

The researcher also foresaw that, triggered by the IRA, if our companies secure key minerals in advance through long-term contracts and succeed in vertically integrating the battery supply chain, they could gain a competitive edge over emerging companies. Considering that the mineral industry usually signs contracts in mid- to long-term forms rather than annually, existing battery and material companies already in the market can have priority to secure stable supply volumes.

Meanwhile, issues and solutions related to domestic and overseas investments planned by companies were also discussed. Regarding domestic investment, companies mentioned difficulties and requests for improvement such as tax credit systems, environmental regulations, and infrastructure development, and the Ministry of Trade, Industry and Energy decided to seek solutions through consultations with related ministries. For overseas investment, given the increased uncertainties such as supply chain policies of foreign governments, soaring energy prices, and subsidy system reforms, there was a consensus on the need for public-private cooperation, including regularly sharing related trends and response statuses.

Director Joo Young-jun said, "Although global supply chain uncertainties are increasing due to the U.S. IRA and others, if we respond one step ahead of competing companies, it could rather be an opportunity to further strengthen the global competitiveness of our industry."

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