Former Democratic Party of Korea leader Lee Jae-myung, a candidate in the presidential primary, noted, "We will create an electric vehicle battery industrial belt in the Daegu and Gyeongbuk regions," emphasizing the importance of fostering the electric vehicle battery industry. In response, the battery industry hopes that the amendment to the tax exemption limit law, known as the Korean version of the Inflation Reduction Act (IRA), will pass in the National Assembly.
According to the battery industry on the 25th, Democratic Party of Korea lawmaker Lee Yeon-hee proposed the "Partial Amendment to the Tax Exemption Limit Law" last January. The amendment primarily allows for cash refunds or third-party transfers for tax credits on investments in national strategic technologies, such as battery manufacturing. Existing laws only stipulate corporate tax deductions. However, the Ministry of Economy and Finance is reluctant to advance the amendment due to budget constraints.
According to the current tax exemption limit law, the battery industry receives about a 15% tax credit for facility investments and around 30% for research and development, based on large companies' standards. However, since the tax credit is deducted from corporate taxes, companies cannot benefit if they do not have operating profits. The three major domestic battery companies (LG Energy Solution, Samsung SDI, SK On) all reported losses in the fourth quarter of last year.
Even amid the electric vehicle chasm, the three battery companies have invested trillions of won over the past three years. LG Energy Solution executed 1.08 trillion won in research and development investments last year. Samsung SDI also invested 1.2976 trillion won in research and development last year. SK On is reported to have invested hundreds of billions of won annually.
In the battery industry, there are claims that Chinese battery companies are growing rapidly with government support and that Korea also needs national-level support. According to SNE Research, the market share of the three domestic battery companies was 34.7% in 2020 but has now dropped to 17.7%. The market share of China's CATL and BYD increased from 30.7% to 55.1% during the same period.
A battery industry official said, "Countries like China and Japan designate batteries as a national strategic industry and support them. To avoid falling behind in global competition, substantial support measures must be introduced."