Secondary Batteries Face Growing Risks in U.S. and European Markets [Click eJongmok]

Trump Administration Abruptly Shifts U.S. Secondary Battery Policy
EU Slow to Implement Policy... Details Remain Undecided

The burden on the secondary battery market is increasing. In the United States, frequent changes in related policies are raising risks, while in Europe, growing uncertainty stems from delays in finalizing detailed regulatory guidelines.

U.S. Secondary Battery Policy: Rapid and Frequent Changes

On September 17, LS Securities released this analysis. In the United States, the Joe Biden administration previously pursued proactive electric vehicle (EV) policies, such as the passage of the Inflation Reduction Act (IRA) in August 2022, the announcement of detailed regulations in 2023, and setting a target for EVs to account for 56% of new car sales by 2030 in 2024. As a result, over the past three years, the Korean secondary battery industry has concentrated its investments in the U.S. As of the first half of this year, the three major Korean secondary battery cell manufacturers accounted for 38% of their EV sales in North America, making it an absolute market along with Europe.

However, the situation has reversed. In July, the Donald Trump administration abruptly rolled back EV support policies through the "One Big Beautiful Bill Act" (OBBBA). Additionally, concerns over policy uncertainty have intensified due to changes in tariff policies and issues raised regarding visa problems for Korean workers at LG Energy Solution and its subcontractors in the U.S.

In the early stages of the market, policy support is a key driver of demand. The clean vehicle tax credit guideline (section 30d), which is set to expire at the end of this month, is likely to have a negative impact on U.S. EV sales growth from the fourth quarter onward. The situation is becoming increasingly uncertain due to shifts in U.S. energy strategy, the rollback of EV policies, and a slowdown in demand growth.

There are additional variables as well. The Canadian government is reportedly discussing the removal or easing of the 100% import tariff on Chinese EVs, which has been in effect since October last year. This move is seen as an effort to revive domestic agriculture, which was hit hard by retaliatory tariffs from China, and to restore the sluggish EV market. If Canada eliminates tariffs on Chinese EVs, it will inevitably put pressure on the growth of Korean secondary battery demand in North America, since most Chinese EVs are equipped with Chinese-made secondary batteries.

EU Delays in Finalizing Battery Regulation Details... Uncertainty Rises

The European Union (EU) established and announced its battery regulation in July 2023, aiming to enhance battery sustainability, safety, and recyclability. The core of this regulation is the disclosure and verification of the carbon footprint throughout the entire battery lifecycle. After a certain stage, the regulation was intended to go beyond simple reporting to include the assignment of carbon performance grades (scheduled for 2026) and the introduction of maximum allowable emission limits (scheduled for 2028).

However, the finalization of the delegated act, which sets out the detailed implementation guidelines, has been delayed. Originally, mandatory carbon footprint reporting for EV batteries was to be phased in starting in February this year. However, the delegated act remains in draft form, and conflicts of interest among member states have delayed implementation by at least a year. As detailed regulations such as carbon footprint measurement methods have not been finalized, companies face uncertainty about how to calculate and report their data.

Jung Kyunghee, a researcher at LS Securities, explained, "In the first half of this year, the three major Korean secondary battery cell companies accounted for 86% of their sales in the European and North American markets," adding, "As uncertainty increases in these markets, risks are rising and this is becoming a factor in share price declines."