The Republican Party in the U.S. House of Representatives is pushing a plan to eliminate the tax credit under the Inflation Reduction Act (IRA) earlier than initially planned, affecting the domestic secondary battery and solar industries. If the tax credit is abolished quickly, performance could deteriorate.
Shares of LG Energy Solution traded at 281,500 won on the KOSPI market at 9:16 a.m. on the 20th. The stock price dropped by 3.43% (10,000 won) from the previous day, marking the lowest price since its listing. Other secondary battery stocks such as Samsung SDI, POSCO FUTURE M, ECOPRO BM, and Ecopro are also weak.
At the same time, Hanwha Solutions shares also fell by over 7%. HD Hyundai Energy Solutions and PARU are also trading at lower prices than the previous day.
This is interpreted as the potential reduction of tax credit benefits from the IRA in the U.S. Punchbowl News reported that Mike Johnson, the House Speaker leading the Republicans, proposed the early elimination of the IRA clean energy tax credit to hardliners and that the Republican leadership has reached a tentative agreement to eliminate all IRA tax credits by 2028.
The elimination date for the advanced manufacturing production tax credit (AMPC) received by LG Energy Solution and Hanwha Solutions was originally set for 2033 but would be moved up to 2028 if changed.
However, many variables remain before the bill can be passed. Republican lawmakers from districts that attracted investments with the IRA oppose drastic tax credit eliminations. The current House composition has Republicans holding 220 seats and Democrats 213 seats, so the bill cannot be passed if just four Republicans defect.
Additionally, it must pass through the Senate, where Politico noted that opinions among Republican senators regarding the IRA tax credit are divided.