According to Zhicheng Finance APP, south korean companies are re-evaluating their plans to invest 54 billion USD in building electric vehicle battery factories in the usa because they are worried that the elected president Trump may cancel tax credits for electric vehicles once he takes office. Insiders revealed that some south korean companies have slowed down or paused some ongoing factory constructions due to concerns about decreased demand for electric vehicles and upcoming policies from Trump. For example, Pohang Iron and Steel, which produces battery cathodes for general motors (GM.US), indicated in a document from September that it would postpone the completion of its Quebec factory due to 'local conditions.'

For a long time, Trump has criticized Biden's efforts to subsidize electric vehicles through his landmark Inflation Reduction Act. Reports indicate that the incoming Trump administration is seeking to reduce fuel efficiency requirements and may cancel the key 7,500 USD consumer tax credits.

Ending hundreds of billions of dollars in subsidies, tax credits, and other incentives would threaten thousands of jobs in the usa and undermine years of efforts to establish an electric vehicle supply chain domestically. This could also impact the profits of south korean companies, as they are key partners in the usa's efforts to reduce reliance on chinese suppliers, which they are already affected by due to soft demand for electric vehicles and falling battery prices.

Kenny Kim, CEO of SNE Research, a company focused on south korean battery manufacturers, stated that although companies have not taken any action yet, many of them feel 'anxious' about the extent to which Trump will cut government incentives for the electric vehicle market.

Byeonghoon Kim, CEO of ford motor (F.US) and electric vehicle battery precursor materials supplier Ecopro Materials Co., stated: 'We are paying attention to every word Trump says about electric vehicles.' 'So far, we have considered the Inflation Reduction Act to be a very important issue. If there are any changes in policy, we may also have to change our global strategy.'

Last week, the Biden administration proposed providing 7.5 billion USD to help a joint venture between Samsung SDI and Stellantis (STLA.US) establish a battery manufacturing factory in Indiana. However, Trump's transition team quickly questioned the proposal. One of the heads of the efficiency department in Trump's upcoming administration, Vivek Ramaswamy, stated on social media that the department will carefully review the facility.

South Korea's three major battery manufacturers - Samsung SDI, LG Energy Solution, and SK On - have announced the establishment of 15 battery factories in the USA. Half of the Korean factories were announced after the Biden administration passed the Inflation Reduction Act in 2022, and these factories are expected to create more than 20,000 jobs, primarily located in the so-called 'battery belt' - from Michigan to Ohio, and from Kentucky to Georgia.

Park Tae-sung, vice president of the South Korean Battery Industry Association, stated, 'South Korea has contributed to job creation and investment in the 'Rust Belt.' He added that the group is negotiating with the US authorities to lobby for the retention of relevant subsidies. Data from the Reshoring Initiative shows that, from 2021 to the first quarter of 2024, electric vehicle batteries account for about half of the USA's foreign direct investment and overseas reshoring; in 2023, South Korea's foreign direct investment and reshoring in the USA created 20,360 jobs in North America, more than any other country.

Amid weak demand for electric vehicles, the reduction of tax credits will be a heavy blow to South Korean battery companies. As the adoption rate of electric vehicles is lower than expected, the price of lithium, a key raw material for electric vehicle batteries, has fallen nearly 90% from its peak in 2022.

LG Energy Solution, a major partner of General Motors, has accounted for about 1 trillion won (approximately 0.773 billion USD) in Inflation Reduction Act-related subsidies so far this year, but analysts expect a net loss for the fiscal year 2023; Ford's partner SK On also received 211 billion won in tax relief from the USA in the first three quarters, but still reported an operating loss.

Furthermore, South Korean companies are also worried that Trump may allow Chinese electric vehicle battery companies to enter the USA. Park Chulwan, a professor in the automotive engineering department at Seojeong University, said, 'The entry of Chinese electric vehicle battery companies into the US market would be a disaster for South Korean companies. Chinese electric vehicle battery companies will offer lower prices.'

However, some are optimistic that Trump will not cut tax credits for electric vehicle battery manufacturers because most of their factories are located in Republican-controlled states. Kitae Kim, CEO of SungEel Recycling Park, a battery recycling plant under construction in Whiteland, Indiana, stated, 'I think they are unlikely to reduce the benefits of the Inflation Reduction Act.'

Pat Wilson, commissioner of the Georgia Department of Economic Development, stated that the four factories' locations in Georgia will also help South Korean companies 'maximize their ability to effectively reach consumers nationwide.' 'The US market is still the most important consumer market in the world. South Korean companies have known this even before the Biden administration, and the new government taking office will not change this fact.'