[Column] "Trump Era: Batteries as Both Crisis and Opportunity"

"I hope it won't be treated as too big of a problem that the second Trump administration is starting. It is both a crisis and an opportunity."

Lee Seok-hee, CEO of SK On, made this appeal to reporters on the 14th right after a meeting between the Ministry of Trade, Industry and Energy and the battery industry. The meeting was a communication opportunity between the government and the industry to assess the impact on the battery sector following Trump's presidential election. Not only CEO Lee but also representatives of battery cell and material companies, as well as government and association officials met on site, shared the view that "crisis and opportunity coexist." Minister Ahn Duk-geun of the Ministry of Trade, Industry and Energy also said, "The battery industry is facing a challenging task with the change in U.S. government policy direction during difficult times such as the chasm," but added, "I believe we can definitely find new opportunities based on the trust built through technological capabilities and the results of large-scale investments."

Industry insiders expressed concern that the market is overreacting more than the upcoming Trump administration itself. During his campaign, President-elect Trump advocated for the repeal of the Inflation Reduction Act (IRA), which includes subsidies. However, the industry says that repealing or amending the U.S. Inflation Reduction Act (IRA) is not simple. Since electric vehicle and battery factories have been established in the Rust Belt and Sun Belt regions, which played a role in Trump's election, a full repeal of the IRA could lead to economic contraction in those regions.

CEO Lee said, "I think it will be difficult to see a sudden change in the Advanced Manufacturing Production Credit (AMPC), which has the greatest impact on battery companies, even if the Trump administration is re-elected," adding, "Among the 18 Republican lawmakers who signed a petition opposing the repeal of the IRA, 15 were re-elected this time." The AMPC is a tax credit program under the Inflation Reduction Act that provides up to $45 per kilowatt-hour (kWh) of tax credit to companies producing battery cells and modules locally in the U.S.

There are also predictions that policy changes due to the start of the Trump administration will raise entry barriers in the electric vehicle and battery markets. An industry insider said, "If some concerns such as subsidy reductions materialize, latecomers or startups in the market will naturally be eliminated or investments will shrink," adding, "This will solidify the position of our companies that have already invested in the growing North American market." Companies that decided to invest early are effectively inside the inner circle.

Of course, a sense of crisis is necessary. Kim Jang-woo, Vice President and Head of Management Support at Ecopro BM, said, "If subsidies are reduced, the pressure to lower costs will intensify." This seems to mean that it is better to check potential problems rather than vague concerns.

The U.S. presidential election is over, and political uncertainty has cleared. Now, careful response is needed. Rather than excessive worry, it is necessary to look at both the short- and long-term impacts of subsidy reductions and the factors of crisis and opportunity together.

Jung Dong-hoon, Industrial IT Department Photo by Jung Dong-hoon