South Korea on Friday said it will provide 7 trillion won ($5.32 billion) in financial support for its battery makers seeking to invest in infrastructure in North America over the next five years to help firms cope with the U.S. Inflation Reduction Act.
Government support will include lowering lending rates and insurance premiums by as much as 20% as well as providing more loans and tax credits for Korean firms’ battery and material production facilities in the region, the industry ministry said.
The U.S. Treasury Department last week unveiled stricter electric vehicle (EV) tax rules, requiring automakers to source a certain percentage of critical minerals for EV batteries from the United States or a U.S. free-trade partner to qualify for new U.S. federal incentives under the Inflation Reduction Act.
The act requires 50% of the value of battery components to be produced or assembled in North America to qualify for a $3,750 credit and 40% of the value of critical minerals sourced from the United States or a free trade partner also for a $3,750 credit.
“Both the government and businessmen should cooperate to find solutions together to effectively cope with situations changing rapidly after the Inflation Reduction Act,” Trade Minister Lee Chang-yang said while presiding over a meeting with major battery cell makers and materials firms.
In November, South Korea launched the government-backed battery alliance to better source key metals dominated by China to bolster battery supply chain stability.
South Korea’s LG Energy Solution Ltd (LGES), Samsung SDI Co Ltd and SK On comprise three of the world’s five biggest EV battery cell makers, commanding more than a quarter of the global market and supplying the likes of Tesla Inc, Volkswagen AG and General Motors Co.
In March, LGES said it would resume a stalled U.S. battery project with a $5.6 billion investment in Arizona to qualify for federal incentives under the Inflation Reduction Act.