Detailed US IRA guidance, industry impact and outlook
Excluding ‘cathode active material’ from the parts standard
Most domestic manufacturing, subsequent US process
The Ministry of Industry “expects to expand supply between the two countries”
Only in the United States does recycling have to be subsidized
No mention of tax deductions… no optimism
I let out a sigh, but the uncertainty remains. Instead, the demand of the United States to build ‘Battery America’ in the medium to long term has been revealed more clearly. China’s offensive to avoid this is also expected to become more severe. This is the evaluation of domestic experts and industry officials who confirmed the detailed guidelines of the US Inflation Reduction Act (IRA) published on the 31st of last month (local time).
Looking at the guidelines on the 2nd, a large part of what the government and industry were hoping for was reflected. A typical example is that ‘cathode active material’ was not interpreted as a part. Cathode active materials are mainly made in Korea and later processed in the United States. If the cathode active material was interpreted as a component, it would be difficult to meet the condition “more than 50% of battery components must be sourced from North America,” but that was no longer possible. Regardless of where the core minerals were extracted, if more than 50% of added value through processing was created in the US or a country that signed a free trade agreement (FTA) with the US, subsidies were to be provided .
The government promoted this publication as a result of the extensive administration of the state. The decision is said to have been made in our favor thanks to related discussions, such as President Yoon Seok-yeol’s meeting with US Trade Representative Catherine Thai and conveying the concerns of the domestic industry. The Ministry of Trade, Industry and Energy also said, “Uncertainty in the domestic battery and materials industry has been generally resolved, and cooperation in the supply chain between Korea and the United States will be strengthened.” Even in the industry, the evaluation that “the worst has been avoided” dominates.
However, there are quite a few things that are not clear enough to alleviate. First of all, there was no mention of a ‘foreign group of concern’. Currently, if battery parts from next year and core minerals from 2025 are procured by foreign organizations involved, subsidies cannot be received, but it is difficult to guess which countries will be included. In the semiconductor field, the whole of China has been designated as a group of concern, but in the battery side, there is also a view that it will be impossible to completely ban China, which has a global supply chain. For this reason, it is seen that China will try to enter the United States in different ways, such as Ningdusdai (CATL), which recently found an IRA bypass in collaboration with Ford and Tesla. An industry insider said, “If China is immediately excluded, the United States itself seems to be hurt, so it seems to have left some room.”
There is also an attempt to further strengthen the ‘American order’ of the battery industry from a medium to long term perspective. In this detailed guide, when recycling minerals extracted from waste batteries, the process must be done in the United States to receive subsidies. Although the government and the industry have not yet paid attention, it is a clause that can become a stumbling block when the market is mature.
The ‘production tax credit’ (AMPC) that domestic companies intending to make large-scale investments in North America will receive this time was also not mentioned. Earlier, in the stock market, “a tax credit of 35 to 45 dollars per kilowatt-hour (㎾h) is expected based on module sales. If the payment is confirmed along with the publication of detailed guidelines, the performance of LG Energy Solutions and SK On will improve significantly.” ‘ I have given you a vision.
Nothing has changed in the automotive industry. Hyundai Motor Group still has no choice but to wait for a factory dedicated to electric vehicles in North America, which is expected to be completed in 2025. Hyundai Motor Group said on the day, “We will actively use’ r the commercial vehicle (lease) program which allows tax deductions regardless of battery requirements, while promoting various measures such as collaboration with battery companies.”
Experts point out that excessive optimism is prohibited. Park Chul-wan, a professor in the Department of Smart Automotive at Seojeong University, pointed out, “It is time to refresh the market analysis conservatively because the simple takeover interpretation of ‘beat China and save Korea can ‘ hide the essence of the matter.”
Reporter Kyungjin Oh