Korean carmakers worry as U.S. seeks to promote use of local rare-earth metal

Rare-earth EV motor [Photo provided by GM]

The U.S. plans to introduce a bill that will provide incentives for electric vehicle motors that use rare earth minerals processed and made locally, raising concerns among Korean carmakers that the new rules would undermine exports as they rely on minerals from China.

U.S. lawmakers plan to provide tax incentive of $30 per kilogram for locally manufactured EV motors that use locally processed rare-earth mineral, according to industry sources.

The new legislation would be equivalent to the Inflation Reduction Act, which provides tax benefits to batteries produced in the U.S., according to sources.

Neodymium is a rare-earth metal and are essential part of in EV motors. Korean manufacturers import the metal from China, the largest producer of rare-earth metals, including neodymium. Consequently, they will face unfavorable conditions if the legislation is passed into law.

According to the U.S. Geological Survey, 78 percent of the rare-earth metals and compounds the U.S. imported last year were from China. Washington intends to end its reliance on China for rare-earth elements. The U.S. Senate has recently proposed a bill to ban Chinese rare-earth elements by prohibiting their use in advanced weapon systems after the end of 2026.