[Interview] "Electric Vehicle Chasm Will End in 2027... Must Compete Without Subsidies," Jang Jeonghun, Director at Samsung Securities

AMPC under the U.S. Inflation Reduction Act Remains Uncertain
Eco-friendly Policies May Retreat in Europe
Inventory Adjustments in Q1 Could Mark the Bottom,
but Full-scale Growth Will Take More Time
Silicon Anode Materials and Solid-state Batteries Offer Growth Potential

Jang Jeong-hoon, an analyst at Samsung Securities, is being interviewed by Asia Economy. 2025.02.05 Photo by Yoon Dong-joo

"The chasm, a temporary stagnation in demand, will disappear only by 2027 when electric vehicles (EVs) can compete with internal combustion engine vehicles without subsidies, allowing secondary batteries to grow normally."

As soon as U.S. President Donald Trump began his term, he halted the payment of EV subsidies under the Inflation Reduction Act (IRA). The continuation of the Advanced Manufacturing Production Tax Credit (AMPC) is also uncertain. Regarding this, Samsung Securities researcher (Director) Jang Jeong-hoon said in an interview with Asia Economy on the 5th, "Korean secondary battery companies need to prepare for the worst-case scenario," adding, "The era of expecting EV market growth relying on subsidies is practically over." Director Jang also predicted that EV expansion policies are likely to retreat in Europe following the U.S.

Director Jang explained, "The second term of Ursula von der Leyen, President of the European Union (EU) Commission, shows right-wing tendencies," and "there is a possibility of significantly relaxing existing eco-friendly regulations." During her first term starting in 2020, von der Leyen approved the Green Deal policy, introducing a series of environmental regulations such as greenhouse gas reduction and EV adoption expansion. As a result, EVs increased significantly in Europe, but criticism arose that European manufacturers were weakened while Chinese companies benefited. Facing this backlash, von der Leyen's second-term commission is showing moves to ease existing environmental policies.

Similar phenomena are occurring in individual countries. In the upcoming German general election on the 23rd, conservative and far-right parties are currently dominant. If conservative parties come to power, EV subsidy policies in Germany may also retreat.

In the U.S., the largest market for domestic secondary battery companies, President Trump signed the "American Energy Independence" executive order on his first day in office, temporarily halting EV subsidies under the IRA. The U.S. government plans to review the validity of the IRA policy over the next 90 days before deciding whether to continue it. Director Jang said, "Korean companies expect that the AMPC benefit may be maintained, but it is difficult to be optimistic." The AMPC is a system that provides tax credits to companies producing eco-friendly products such as batteries and solar power in the U.S. Last year, LG Energy Solution and SK On reflected about 3 trillion won in operating profit from revenues earned through this.

Director Jang assessed that although Korea's battery industry has grown thanks to eco-friendly vehicle promotion policies in the U.S. and Europe, the era has come when competition must be made without subsidies. He explained, "The EV chasm that began in 2023 was greatly affected by the U.S. introducing the Foreign Entity Ownership Control (FEOC) system, which significantly reduced the number of EVs eligible for subsidies," adding, "If subsidy policies under the IRA are halted, even FEOC will become meaningless."

FEOC essentially refers to Chinese companies and served to restrict China's supply chain from qualifying for U.S. EV subsidies. As a result, domestic companies benefited, but the overall market shrank as the number of EVs eligible for subsidies decreased. However, if the FEOC system itself is neutralized, a situation may arise where Korea and China compete equally in the U.S. EV supply chain.

Director Jang forecasted that since the current EV chasm stems from subsidy policy reductions in major countries, the EV market will only return to a normal growth trajectory when the parity era arrives, where EVs and internal combustion engine vehicles have equal prices without subsidies.

Generally, for EVs to reach price parity with internal combustion engine vehicles, battery prices (pack basis) need to fall below $100 per kilowatt-hour (kWh). According to BloombergNEF, the battery pack price per kWh in 2024 recorded $115, a 20% decrease from the previous year. Director Jang said, "At the current rate of price decline, battery pack prices are expected to fall below $100 by 2027," and "EVs will overcome the chasm and compete with internal combustion engine vehicles without subsidies."

Domestic battery cell companies such as LG Energy Solution and Samsung SDI have previously forecasted that demand will gradually recover from the first quarter of this year. Regarding this, Director Jang said, "This is because major automakers' battery inventory adjustments are expected to conclude in the first quarter," but he evaluated, "Even so, it does not seem that a full-scale recovery phase will begin." Ultimately, this means that investment in secondary battery companies should be approached conservatively for now.

Director Jang also predicted that mineral prices such as lithium and nickel will maintain current levels for the time being. In China, oversupply of secondary batteries has not resolved inventory, so mineral demand is not increasing easily. However, mines are not reducing production either. Director Jang explained, "Major Chinese secondary battery companies like CATL and BYD continue lithium mining even at a loss, so supply is not decreasing," and forecasted, "Lithium prices may rebound around 2027."

Regarding the 46-series (46mm diameter) cylindrical batteries that domestic battery companies are expecting, Director Jang diagnosed that the completion of dry electrode technology will be an important criterion. He explained, "The main reason for introducing the 46-series is cost reduction, and dry electrodes must be introduced for this." Without adopting dry electrodes, there is no reason to replace the current 2170 batteries.

Director Jang positively evaluated silicon anode materials and carbon nanotube (CNT) conductive additives that can help increase the silicon anode content, which can improve battery performance by one step. Silicon anode materials were previously installed in high-end EV batteries but began expanding to affordable EVs after the Kia EV3 last year. As silicon anode production expands, the high prices that were obstacles to market expansion are expected to decrease.

Director Jang viewed the long-term success potential of solid-state batteries highly. He forecasted, "The market share of solid-state batteries will remain around 2% in 2030, but once commercialization succeeds and mass production systems are established, prices will fall and the market will expand rapidly."