Posted on 11 Nov 2022
Leading South Korean electric vehicle battery firms SK On and Samsung SDI have lately joined LG Energy Solution (LGES) in making their voices heard by the US Internal Revenue Service (IRS) regarding an upcoming tax reform related to the EV battery industry, according to Reuters.
After South Korea’s trade, industry and energy ministry (MOTIE)'s initiative, the companies, which are backbones of the global EV supply chain, expressed their concerns on the feasibility of the new policies in their comments sent to the IRS and asked for more flexibility. The companies worry if the change may harm their established supply chain and cost advantages through long-term deals with leading automakers. They are also concerned whether the change will leak their sensitive information.
SK On says: "It may 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."
As previously reported by Kallanish, in order to strengthen the US domestic manufacturing and supply chain, related requirements on conditions to continue enjoying tax credits in the US will be imposed on EVs as part of the Inflation Reduction Act.
Starting from 2023, at least 40% (in terms of value) of the critical minerals used for EV batteries must be extracted or processed in the US, or a country that has a free trade deal with the US, for the related parties to qualify for the tax credits. By 2027, the percentage requirement will rise to 80%.
Starting from 2023, at least 50% of the battery components need to be manufactured or assembled in North America. That number will be 60% in 2024 and 2025 and then increase gradually to 100% in 2029.
Source:Kallanish
