South Korea’s SK, Samsung, LG Urge the U.S. to Reconsider Tax Credit Rules

South Korean battery manufacturers SK On, SK Innovation, Samsung and LG Energy Solution (LGES) urged the U.S. government to reconsider electric vehicle (EV) tax credit rules of the Inflation Reduction Act (IRA) in view of the complex supply chain for the industry and not hold the sector to “impossible requirements”.  The battery makers expressed their concerns in comments submitted to the U.S. Internal Revenue Service (IRS).

The new EV rules, which say at least 40% of the battery critical minerals need to be from the U.S. or a free trade partner for the EVs to qualify for tax credits, will be implemented from Jan. 1 2023. That figure will gradually rise to 80% in 2027.

“It is extremely difficult to build most clean energy technologies, including EV batteries in the United States, without using certain foreign-made parts and, specifically, raw materials extracted or processed in China,” LGES said.

LGES further stated that a transformation in the battery supply chain cannot occur overnight, urging the U.S. not to hold the industry to “impossible requirements and timelines”.

LGES, SK On and Samsung SDI, three major South Korean battery makers that supply to automakers such as Tesla, General Motors and Ford among others, together command more than a quarter of the global EV battery market.

“A limited interpretation would also risk unintended market outcomes, such as sudden price hikes for suppliers in specific countries, and unnecessarily concentrate processing in limited places. Such market distortions could create artificial costs and barriers along the supply chain,” SK On said.

LGES has also asked the United States to establish a confidential process to share battery composition, pricing and sourcing information with the Treasury Department to ensure that such sensitive information is not disclosed to competitors.

The U.S. Treasury and IRS started seeking public comment on the new law last month. A total of 821 comments from automakers, parts makers as well as foreign governments have been submitted to the IRS.

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