The Republican Party, the majority party in the U.S. House of Representatives, is pushing a bill to terminate the tax credit for electric vehicles based on the Inflation Reduction Act (IRA), causing concern in the electric vehicle and battery corporations in South Korea. The Republican Party is also pursuing measures to complicate the entry of Chinese battery corporations into the U.S. market, which some analysts say could present an opportunity for South Korean battery corporations.
According to foreign media, including The Wall Street Journal (WSJ), the U.S. House Committee on Ways and Means unveiled a tax bill on the 12th (local time) that includes a provision to abolish the electric vehicle tax credit from the IRA by 2027. The IRA offers taxpayers a tax credit of up to $7,500 for purchasing electric vehicles that are assembled in North America and meet key mineral and battery requirements.
The bill has moved the deadline for the tax credit, which was set for Dec. 31, 2032, to Dec. 31, 2026, advancing it by six years. It also stipulates that electric vehicles sold in the U.S. from Dec. 31, 2009, to Dec. 31, 2025, that exceed 200,000 units will be excluded from the tax credit eligibility. This means that companies like Tesla, General Motors, and Hyundai Motor Group will likely receive electric vehicle subsidies only until this year.
If the electric vehicle tax credit is terminated early, demand for electric vehicles will decrease, impacting the battery industry. The bill presented by the Republican House also includes a provision to abolish the Advanced Manufacturing Productivity Credit (AMPC) for South Korean battery companies by the end of 2031. Currently, the tax credit amount is set to be gradually reduced and abolished by early 2033.
LG Energy Solution, Samsung SDI, and SK On received AMPC benefits while investing in the U.S. In the first quarter of this year, LG Energy Solution received 457.7 billion won in AMPC, while Samsung SDI and SK On received 109.4 billion won and 170.8 billion won, respectively.
The bill includes conditions under which it would be difficult for Chinese corporations or collaborations with Chinese corporations to receive AMPC, suggesting it could be an opportunity for South Korean battery corporations to increase their market share in the U.S. The bill states that AMPC will not be available if parts are supplied by "prohibited foreign entities" or if the licensing value with foreign institutions exceeds $1 million, with China included among the prohibited foreign entities.
An industry representative in the battery sector noted, "Essentially, this is a measure to block the entry of Chinese battery companies into the U.S. market, creating favorable conditions for South Korean battery companies that have production facilities in the U.S.," and added, "If the bill passes, it will be difficult to maintain licensing agreements between Ford and Tesla and Chinese companies like CATL, leading to increased orders for South Korean battery companies with production facilities in the U.S."