South Korea said on Tuesday it has launched the government-backed battery alliance to better source key metals in a bid to support the country’s battery industry.

The plan is part of President Yoon Suk-yeol administration’s strategy to strengthen the growing industry.

South Korea, home to major battery makers LG Energy Solution , Samsung SDI and SK Innovation’s SK On, is seeking to bolster supply chain stability and metals to become a major player in the field, which is dominated by China.

“We are seeing growing uncertainties in the (battery) industry due to reorganization of supply chains in major countries ... joint strategies between public and private sectors has become more crucial than ever,” Minister of Trade, Industry and Energy Chang-Yang Lee said in a statement.

Exports of lithium-ion batteries rose 16.7% to $800 million in October from the same month a year ago, while South Korea’s total exports shrank 5.7% to snap a 23-month gaining streak, trade ministry data showed.

The South Korean government’s support comes as the U.S. Inflation Reduction Act, which requires automakers to source a certain percentage of critical minerals for their EV batteries from the United States or an American free-trade partner, is set to affect the battery industry.

From next year, the new rules will require that at least 40% of the monetary value of critical minerals for batteries be from the United States or an American free-trade partner in order to qualify for U.S. tax credit. That share will rise to 80% in 2027.

The country’s three major players, which supply to major automakers, including Tesla Inc, General Motors Co and Volkswagen among others, together command more than a quarter of the global EV battery market, according to SNE Research.

Analysts said the new U.S. battery rules could benefit the South Korean firms as all three major battery makers already have production sites in the United States.

“Although South Korean battery makers still need some time to figure out how to meet those mineral sourcing rules, their experience in the EV battery business and joint ventures with material makers will help the company better consolidate their presence in the U.S. EV market,” said Kang Dong-jin, an analyst at Hyundai Motor Securities. (Reporting by Heekyong Yang; Additional reporting by Jihoon Lee, editing by Ed Osmond)

By: DocMemory
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