[Insight & Opinion] How K-Batteries Can Stay Ahead in the Global Leadership Race

Opportunities for a Leap Forward: OBBBA and Tariff Agreement
Tax Credits, R&D, and Investment Cooperation Are Key

The Korean battery industry has faced a complex crisis in recent years, including a temporary stagnation in the electric vehicle market (the so-called "EV chasm"), trade risks with the United States, and aggressive pricing and technological advances from China.

According to market research firm SNE Research, China holds a 77.4% share of the global battery market, while Korea's share is only 17.4%. In the non-Chinese global market, China also surpassed Korea for the first time in the first half of this year, with a 49.2% share compared to Korea's 40.6%.

China has rapidly strengthened its competitiveness through its "Made in 2025" national strategy, large-scale government subsidies, and the effective use of its domestic market. In particular, the spread of lithium iron phosphate (LFP) batteries poses a significant challenge to K-battery manufacturers.

Fortunately, recent changes in both domestic and international environments are providing opportunities for a renewed leap forward. The enactment of the U.S. "One Big Beautiful Bill Act (OBBBA)" and the conclusion of Korea-U.S. reciprocal tariff negotiations have reduced trade uncertainties. As a result, K-batteries now have the chance to secure a competitive edge not only in electric vehicles but also in the U.S. energy storage system (ESS) market. Additionally, new government initiatives such as the AI economy, energy superhighways, and RE100 industrial complexes are further supporting the resurgence of K-batteries.

The battery industry is a new growth sector, expanding by 20?30% annually. Alongside semiconductors, K-batteries are one of the few strategic industries in which Korea can compete with China. Before China becomes an insurmountable force in the global market, the new administration must swiftly implement bold policies to strengthen global competitiveness.

Given Korea's limited resources and small domestic market, the country must excel in fundamental competitiveness to survive. To this end, I hope the new administration will promptly pursue three key policy initiatives.

First, Korea should introduce a domestic production tax credit for advanced strategic industries. The United States and Japan have already implemented such measures. Through the OBBBA, President Trump decided to maintain the U.S. Advanced Manufacturing Production Credit (AMPC) system until 2032. Korea's three major battery companies received KRW 1.8 trillion last year and KRW 1.5 trillion in the first half of this year from the U.S. government under the AMPC system.

Implementing a domestic production tax credit, starting with companies involved in strategic industry materials, components, and equipment, and allowing "domestic production + overseas sales" would enhance its effectiveness. This approach would help stabilize supply chains that are dependent on foreign sources, prevent industrial hollowing-out, and promote regional balance and job creation.

Second, Korea must strengthen research and development (R&D) investment to secure a technological edge. In the first half of this year, the combined R&D investment of Korea's three major companies (KRW 1.4 trillion) was less than half that of China's CATL (KRW 2.7 trillion). Government support for next-generation batteries is also only one-tenth of China's level.

To meet the demands of not only next-generation batteries but also new industries such as robotics, urban air mobility (UAM), and AI data centers, it is necessary to increase the R&D budget and introduce a direct refundable R&D investment tax credit. These measures would reduce the financial burden on companies and actively encourage private sector R&D investment.

Third, Korea should strengthen investment cooperation with the United States. As a follow-up to the tariff negotiations, it is necessary to exempt or reduce tariffs on equipment and raw materials for local plant construction. Since the four key materials?cathodes, anodes, separators, and electrolytes?account for a large portion of battery costs and are difficult to procure within the United States, such measures are essential for ensuring the competitiveness of local investors.

Batteries are a vital strategic industry for electric vehicles, energy transition, and future mobility, as well as a strategic asset for supply chain security. If Korea continues to lose ground in the global battery leadership race, it will be difficult to expect a promising future for K-batteries.

Although the implementation of these policy tasks involves various variables, such as fiscal burden and global cooperation, bold action is necessary to strengthen the fundamental competitiveness of K-batteries. The determination and swift execution of the new administration will be the key to securing K-battery competitiveness and maintaining Korea's strategic position in the global supply chain.

Taesung Park, Executive Vice President of the Korea Battery Industry Association