The South Korean government has announced a $5.32 billion i.e. 7 trillion won worth of financial support for domestic battery manufacturers who are looking to expand their domain outside Korea. As per the government, the corporations planning to build infrastructure in North America will be eligible to receive financial help in form of loans, insurance schemes and so on.
In the next 5 years, the Korean administration will spend the newly announced funds. There will be more tax incentives, loans and insurance schemes coming up that will help not only battery manufacturers but suppliers and producers of material as well. At the same time, firms dealing with batteries won’t have to take on the burden of excessive interest rates. The new policy of the Korean government will lower the loan rates along with insurance premiums by at least 20 percent.
With the new announcement, the companies in the battery industry will be provided with assistance to manage the comprehensively adverse 2022 Inflation Reduction Act (IFA) of the American government. It is seen that the recently issued tax rules on electric vehicles or EVs by the U.S. Treasury Department under IFA are more apt towards the US and its Free Trade Agreement (FTA) partners.
As per the latest batch of tax rules within IFA, battery manufacturers will be qualified for tax credits if they source minerals from those countries that have signed an FTA with the US. The IFA is a bit hostile towards China and doesn’t articulate support to companies if their minerals are sourced from China.
The IFA has been giving hard time to Korean battery manufacturers since the majority of them get their material supplies from China. However, last week, the U.S. Treasury Department did give relief by letting EV companies continue sourcing from countries without FTA till this year.
Lee Chang Yang, the current Trade Minister of South Korea held a meeting with battery cell manufacturers and material firms. The meeting concluded with an assessment that it was time for both government and private companies to join forces. Ultimately, they can reach a feasible answer to their problems and handle the challenges ahead.
In November 2022, leading Korean battery manufacturers such as Samsung SDI, LG Energy Solutions, and SK On formed an alliance which the Korean government also endorsed. Not only battery leaders but also any business that falls in the supply chain of batteries joined the alliance. From the material and refining industries, corporates from all public institutions were a part. The main objective behind the alliance was mostly to curb China’s rising dominance in the global battery market and supply chain.
The latest reports say that China has a 56.4 percent grip on the global market share for rechargeable batteries while South Korea holds around 25 percent share at a global scale. With the battery alliances and funding, Korea aspires to take their global market share of rechargeable batteries to 40 percent in the next 7 years or so.