High Dependence on Chinese Minerals May Affect EV and EV Battery Makers
By Michael Herh
August 10, 2022, 09:16
The Inflation Reduction Act of the United States is putting pressure on South Korean EV and EV battery manufacturers, as their manufacturing facilities in the United States are still not enough.
According to the act to be applied to EVs manufactured in 2025 and later, an EV is not eligible for the subsidy if a certain mineral in its battery is from a certain country, China to be specific. The act stipulates that at least 40 percent of key EV battery minerals must be supplied from the United States or one or more countries in FTA with the United States. This must be met by 2023 and the minimum required ratio goes up to 50 percent and 80 percent in 2024 and 2027, respectively.
In the meantime, the Korea Chamber of Commerce and Industry announced on Aug. 9 that South Korea recorded a trade deficit with China for three months in a row until July this year. According to the chamber, EV battery-related raw materials and intermediate goods are one of the main causes of the deficit. “When it comes to precision chemical materials for use in EV batteries, South Korea’s imports from China almost doubled to US$7.25 billion from the first half of last year to the same period of this year,” it said, adding, “Likewise, the imports of storage batteries as intermediate goods almost doubled to US$2.18 billion.”
South Korea’s reliance on China in the industry is extremely high. Last year, the reliance on Chinese manganese products and aluminum cables amounted to 99 percent and 97.4 percent, respectively. The figure is 94.5 percent in the case of magnesium ingots and scrap and 87.7 percent in the case of graphite. At present, it is practically impossible for South Korean companies in the industry to find alternative suppliers with China accounting for more than 70 percent of the global raw material refining industry.
In the same context, South Korean EV battery manufacturers’ products are also extremely dependent on Chinese raw materials. Last year, the NCM lithium-ion battery precursor purchase from China of LG Energy Solution, SK On and Samsung SDI was US$2.412 billion, up 94.6 percent from a year ago. LG Energy Solution and Huayou Cobalt recently set up a joint venture for material extraction from waste batteries. The two countries’ cooperation in EV and EV battery supply chains is continuing to expand and EV battery manufacturing is impossible without China.
This fact is a heavy burden on the part of South Korean automakers. Another increasing burden is the act to limit subsidies to EVs produced in the United States. At present, the Hyundai Motor Company and Kia EVs in the U.S. market are produced in South Korea without exception and those models including Hyundai Ioniq 5 and Kia EV6 have received subsidies in the market.
With the importance of manufacturing facilities in the United States increasing, Hyundai Motor Group is failing to respond nimbly. Hyundai Motor Co. is planning to start GV70 EV production in the United States in October, Kia is planning to do the same with EV9 in the second half of 2023, and these are expensive and do not guarantee a dramatic increase in sell-through. The group’s EV plant in Georgia will be put into operation in 2025 at the earliest.
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