South Korea Unveils $29 bn Plan to Fortify Battery Industry Amid Global Competition

By Editor


In a bid to bolster its position in the fiercely competitive battery market, South Korea has announced a substantial financing initiative of 38 trillion won ($29 billion) over the next five years. This initiative aims to enhance the country’s battery industry and reduce dependency on foreign sources for crucial materials.

As of 2022, South Korean giants such as LG Energy Solution, Samsung SDI, and SK On have collectively dominated nearly half of the global battery market, excluding China. However, concerns regarding reliance on external sources for essential materials have prompted the government to focus on diversification strategies.

The comprehensive plan outlined by a consortium of ministries includes tax incentives, loan facilitation, and support for South Korean companies looking to invest abroad for securing mining rights and essential battery materials. Financial backing for firms involved in mineral refinement and recycling is also part of the strategy.

Moreover, the government intends to ramp up financial assistance through loans, guarantees, and insurance, facilitated by institutions like the Export-Import Bank of Korea. These measures are particularly geared toward companies eyeing investments in North America to align with criteria under the U.S. Inflation Reduction Act (IRA) for tax incentives.

Despite a moderated sales outlook for 2024 due to a slowdown in electric vehicle sales—partly attributed to increased auto financing costs—the announced measures are designed to fortify South Korea’s secondary battery industry. The statement emphasizes the long-term vision of elevating the industry’s competitiveness to the global pinnacle.

The government’s multifaceted plan also entails augmenting reserves of vital minerals essential for battery production while nurturing the ecosystem for battery reuse and recycling. This strategic direction seeks to reduce dependence on a select few nations, notably China, for critical mineral supplies, as outlined by the Ministry of Economy and Finance.

Commencing from the upcoming year until 2028, the government plans to disburse over 38 trillion won in financial support across various segments of the battery industry. The aid package includes provisions for accessible loans and insurance benefits, especially regarding investments aligned with the U.S. Inflation Reduction Act (IRA) in the United States and other global locations.

As part of this comprehensive strategy, a dedicated 1 trillion won fund will be established to invigorate the industry, coupled with an investment of 73.6 billion won earmarked for pertinent research and development endeavors.

To preempt potential supply shortages, the government has opted to bolster its state inventory of critical minerals, notably lithium, and has earmarked approximately 250 billion won to aid companies in refining these materials. Moreover, plans are underway to construct a new storage facility at the Saemangeum industry complex on the west coast by 2026, with an estimated budget of 240 billion won, specifically catering to lithium, cobalt, and related elements.

Recognizing its significant reliance on China for crucial mineral supplies, South Korea is actively diversifying its supply sources, prompted by global regulations such as the IRA and the European Critical Raw Materials Act, along with China’s restrictive export policies.

In addition to fortifying the industry’s primary facets, the envisioned financial aid will pivot attention towards nurturing the battery recycling sector. With the prospect of repurposing all batteries, the country anticipates securing enough critical minerals to sustain approximately 170,000 electric vehicles annually.

The government aims to institute a comprehensive information management system encompassing electric vehicle batteries from production to recycling, with a core focus on enhancing safety measures. To achieve this, an expert task force will be assembled to devise meticulous strategies, as confirmed by the finance ministry.

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