SEOUL, April 7, (Reuters) – South Korea announced Friday that it will provide 7 trillion won ($5.32billion) in financial support to its battery makers who plan to invest in infrastructure in North America in the next five years in order to help them cope with the U.S. Inflation Reduction Act.
According to the industry ministry, government support will include lowering insurance premiums and lending rates by as much 20%. It will also provide more loans and tax credit for Korean companies’ material and battery production facilities in the region.
The U.S. Treasury Department announced last week stricter rules for electric vehicles (EVs). This requires automakers to source a specific percentage of vital minerals for EV batteries from the United States, or a U.S.-free-trade partner, in order to qualify for federal incentives under the Inflation Reduction Act.
To qualify for a credit of $3,750, 50% of the battery components must be manufactured or assembled in North America. 40% of critical minerals must also be sourced from the United States, or a free trading partner, to qualify.
While presided over a meeting with key battery cell manufacturers and material firms, Trade Minister Lee Chang-yang stated that both government and businessmen should work together to find solutions to quickly changing situations following the Inflation Reduction Act.
South Korea’s government-backed battery alliance was launched in November to help it better source key metals that China dominates and to improve battery supply chain stability.
South Korea’s LG Energy Solution Ltd. (373220.KS), Samsung SDI Co Ltd. (006400.KS), and SK On are three of the five largest EV battery cell manufacturers in the world. They account for more than a quarter the global market and supply the likes of Tesla Inc. (TSLA.O), Volkswagen AG. (VOWG_p.DE), and General Motors Co. (GM.N).
LGES announced in March that it would resume a U.S. battery project, with a $5.6 Billion investment in Arizona, to qualify for federal incentives under The Inflation Reduction Act.
($1=1,316.2200 won)
Reporting by Heekyong Yan; Editing by Christopher Cushing
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