Many Korean EV battery makers worry about new investments in China: Survey

[Photo by Yonhap]

South Korean companies in the electric vehicle (EV) battery industry are realigning their investments to focus on countries other than China following the implementation of the U.S. Inflation Reduction Act (IRA) that has tightened the conditions for EV subsidies.

According to a survey conducted by Maeil Business Newspaper and Shinhan Investment Corp. on Friday, 73.1 percent out of the 81 companies in the EV battery industry said that China has been pushed down on their investment priority list due to the IRA.

Seven out of the 10 companies that produce EV battery materials and parts also said they are delaying investment in China due to concerns about being disadvantaged in the U.S., the world’s largest market for their products. Eight out of 10 companies chose the U.S. as their top investment destination.

In terms of future investment priorities, 78.5 percent of the respondents chose the U.S., followed by the European Union at 16.5 percent. Only two companies, or 2.4 percent, chose Korea as their top priority.

The IRA, which was released by the U.S. Department of Treasury in March, stipulates that the “core minerals (materials)” and “core components” of the battery must be produced to a certain extent in the U.S. or in countries that have signed a free trade agreement with the U.S. in order to receive up to $7,500 in subsidies per electric vehicle. If production takes place in China, companies may face a disadvantage in receiving subsidies, which is why Korean battery companies are reportedly holding off on their investments in China.

Some 42 percent of respondents said that their biggest concern related to the IRA is the possibility of China being designated as a “foreign entity of concern” when it is announced. If China is included in the list, it would inevitably come as a shock to domestic companies with high dependence on materials and components mined, processed, or recycled in China.

While the U.S. Department of Treasury is expected to announce detailed guidelines for foreign entities of concern soon, worries are growing that Sino-Korean joint ventures may be included in the list.

Korea’s LG Chem Ltd. recently announced a joint venture with China’s Huayou Cobalt Co., the world’s largest cobalt producer, to invest 1.2 trillion won ($914 million) to build a precursor plant for batteries in Gunsan, Korea.