S. Korean automakers share concerns over US Inflation Reduction Act

South Korean officials will meet with agents from the US Trade Representative’s office and the US Treasury to express “concerns” about the Inflation Reduction Act, signed by President Joe Biden on August 16. Officials are expected to tell US agencies that the new law may violate trade agreements, such as the US-South Korea free trade agreement and the WTO agreement. 

The Inflation Reduction Act requires EVs to be assembled in North America and sets a percentage of critical minerals used in batteries to come from the US or an American free-trade partner. 

The law restricts who can receive subsidies for EV production and where firms can source battery materials. South Korean automakers will have to adjust production plans to prioritize US plants and seek new sources for minerals used in EV batteries. 

According to new regulations that take effect next year, at least 40% of the financial value of the essential minerals used in batteries must originate in the US. or one of its free-trade partners. That percentage will increase to 80% by 2027. 

South Korean automakers, like Hyundai, face a competitive disadvantage now that the law has passed. Industry sources said Korean battery makers are scrambling to change mineral sourcing routes to comply with the restrictions.

EV battery makers LG Energy Solution, SK On, and Samsung SDI are struggling to adjust to the new regulations, according to Meritz Securities analyst Kim Jun-sung who spoke to Reuters. LG Energy Solution is based in South Korea and supplies Tesla and General Motors, While SK On and Samsung SDI supply Ford Motor, Volkswagen, and others. Together, the three battery makers hold more than 25% of the global EV battery market, according to SNE Research.

Did you enjoy this article? Please share your thoughts, comments, or questions regarding this topic by connecting with us at newsroom@cbtnews.com.