"K-Battery is Key to De-China Supply Chain... Excessive Concerns are Toxic"

Response Speed to Trump New Administration Launch
"Highlight Competitiveness of Korean Battery Industry
for Job Creation in the US and China Containment"
Need for Joint Response with Electric Vehicles and Semiconductors

Anduk Geun, Minister of Trade, Industry and Energy, is presiding over the "Battery Industry Meeting in Preparation for the New U.S. Administration" held on the 13th at the Korea Institute for Advancement of Technology conference room in Gangnam-gu, Seoul. 2024.11.13. Photo by Ministry of Trade, Industry and Energy, Yonhap News

With former President Donald Trump winning re-election, concerns are rising over potential negative impacts on the Korean battery industry due to reductions in electric vehicle subsidies. However, excessive worry could actually undermine Korea's negotiating power with the U.S. It is essential to actively highlight the contributions to American job creation and the importance of Korean battery companies in the de-China supply chain to the Trump administration's second term.

On the 13th, An Deok-geun, Minister of Trade, Industry and Energy, said at a meeting with the battery industry, "If the new U.S. administration attempts to reduce or repeal the Inflation Reduction Act (IRA), it could have a significant impact on our companies." He added, "To respond to this, we need to emphasize our investment achievements in the U.S., job creation within the country, and the critical role of the Korean battery industry in the de-China supply chain." Minister An also noted that the economic stance toward China is expected to be maintained or even strengthened under the new U.S. administration, which could present opportunities for Korean companies.

President-elect Trump has taken a tough stance on China, including imposing tariffs as high as 60%. In this context, it is important to actively emphasize to the new administration that Korea's battery industry plays a pivotal role in the electric vehicle supply chain's de-China efforts. Currently, with no significant battery companies emerging in North America or Europe, if Korean battery companies also shrink, there is concern that Chinese battery companies could dominate the global market.

Both the government and the battery industry warn that excessive concern over the repeal of the IRA within Korea could be counterproductive. A battery industry executive said, "Since Trump is a skilled negotiator, if we reveal our weaknesses first, we lose bargaining power. It is better to emphasize the competitiveness of Korean battery companies and the cards they can play in the U.S." SK On CEO Lee Seok-hee also told reporters after the meeting, "It would be better if the media did not portray the new administration's launch as a major problem," adding, "There will be crises, but also opportunities." Lee Byung-hee, COO of L&F, said, "Since the new U.S. administration's policies and appointments have not yet been finalized, it is necessary to calmly observe the situation."

In fact, Korean battery companies' proactive investments in the U.S. so far could serve as significant bargaining chips with the new administration. According to an analysis by the Korea Institute for Industrial Economics and Trade, as of 2023, the battery production capacity (CAPA) of the three major domestic battery companies in the U.S. reaches 117 gigawatt-hours (GWh). Once announced investment plans are completed, this is expected to reach 635 GWh by 2027. Considering that an investment of approximately 100 billion KRW is required per 1 GWh, the investment effect of Korean battery companies in the U.S. is estimated to exceed 60 trillion KRW.

The Biden administration encouraged domestic investment through stricter environmental regulations, the Advanced Manufacturing Production Credit (AMPC) under the IRA, and electric vehicle subsidies. In contrast, the Trump administration is expected to enforce domestic investment through tariff barriers. However, if the AMPC is repealed, Korean battery companies' investment plans in the U.S. will inevitably shrink, potentially leading to job losses within the country.

Notably, Korean battery companies' production plants in the U.S. are located in Republican regions. LG Energy Solution operates or is constructing sole or joint factories in Michigan, Ohio, Tennessee, Arizona, and Georgia. SK On operates or is establishing plants in Georgia, Tennessee, and Kentucky. Samsung SDI is building a plant in Indiana.

In August, 18 Republican lawmakers in the U.S. signed a letter opposing the repeal of the IRA, concerned about negative impacts on investments in their districts. It is understood that 15 of these lawmakers were re-elected. This has led to speculation that President-elect Trump may not easily repeal the IRA. CEO Lee Seok-hee also predicted that even if the Trump administration's second term begins, there will be no drastic changes to the AMPC.

Park Tae-sung, Vice Chairman of the Korea Battery Industry Association, explained, "The proactive investments by domestic battery companies in the U.S. can serve as a very strong advantage," adding, "It aligns with President-elect Trump's pledge to revitalize manufacturing in underdeveloped regions such as the Sun Belt and Rust Belt, which should be emphasized to the new administration." Park also noted, "Just as LG Energy Solution's batteries are installed in Elon Musk's SpaceX, the close cooperation between Korea's battery industry and the U.S. defense and space industries is also an opportunity." Elon Musk will serve as the head of the Government Efficiency Committee under the new administration.

Voices also called for joint responses from related industries such as electric vehicles and semiconductors, not just the battery industry. A senior battery industry executive said, "While individual industries are important, it may be more effective for related companies in automotive, semiconductors, and others to respond jointly with the government." The Ministry of Trade, Industry and Energy plans to form a public-private task force dedicated to cooperation with the U.S. in preparation for the new administration's launch.