Chinese Battery Makers Invest in South Korea to Tap US EV Subsidies

The US Inflation Reduction Act (IRA) is offering substantial incentives to Chinese battery materials companies, encouraging them to invest in South Korea. These subsidies, reaching up to 30% for battery and component production, are not applicable to materials manufactured in China.

Chinese companies are making significant investments in South Korea, amounting to $4.4 billion in projects over the past year. These projects involve the establishment of new battery materials factories and the expansion of existing ones.

This influx of investment from Chinese battery materials companies is a significant boon for South Korea's battery industry. South Korea already holds a prominent position in the global battery market, and this investment is expected to further strengthen its standing.

Nonetheless, a word of caution must be considered. The US government may still classify materials produced in South Korea by Chinese companies as products of a "foreign entity of concern," rendering them ineligible for subsidies. Such an outcome would be a major setback for the Chinese firms that have ventured into South Korea.

The increasing investments by Chinese battery materials companies in South Korea underscore the growing significance of the IRA battery production subsidies. These incentives are anticipated to have a profound impact on the global battery market, and they have already made considerable headway in influencing the South Korean battery industry.

The investment made by Chinese battery materials companies in South Korea is a positive development for the global battery market. It reflects the growing importance of the US electric vehicle market and is likely to bolster the leading position of Chinese companies in the global battery market. Additionally, it holds positive implications for the South Korean economy.