The Strategist

South Korea to allocate $29B over 5 years to support battery manufacturers

12/14/2023 - 02:23

Over the next five years, the South Korean government plans to provide battery makers with 38 trillion won ($29 billion) in support to help them diversify their supply chains.

Jacobs School of Engineering, UC San Diego
Jacobs School of Engineering, UC San Diego
According to the Financial Times, the financial help package will include credit guarantees, soft loans, and tax incentives.

South Korean firms LG Energy Solution Ltd., Samsung SDI Co., and SK On Co. hold nearly half of the world market for electric vehicle batteries excluding China; however, the nation's finance ministry stated that supply chain diversification and "internationalization" of raw material procurement channels are urgently needed.

Under the Inflation Reduction Act (IRA) program, which was implemented in the US in 2022, South Korean authorities plan to help businesses get tax incentives in the US. According to the IRA, producers of electric vehicles must guarantee that 40% of the raw materials for their batteries come from the US or one of its free trade partners, and that 50% of the batteries they use are produced in the US.

The US also put a ban earlier this month on the use of Chinese parts in batteries for businesses obtaining IRA tax credits.