A Major EV Win For The Biden Administration

On Sunday, the two South Korean battery makers, LG Energy Solution and SK Innovation Co. reached a settlement that will allow two plants in Georgia to move forward with plans to produce lithium-ion batteries for Ford Motor Company F and Volkswagen VWAGY. The settlement was reached before the Biden administration's deadline on Sunday to intervene and reverse the decision made by the U.S. International Trade Commission.

This outcome is a major win for the administration which recently unveiled a sweeping infrastructure plan to boost its EV progress. Biden's $2 trillion infrastructure plan includes $174 billion in EV spending, which is more than the amount proposed for spending on roads and bridges.

The Deal

Back in February, the ITC ruled that SK Innovation had stolen trade secrets related to EV batteries from LG Energy Solutions and ordered the U.S. to block the company from importing supplies to build batteries. The companies agreed to drop litigation in both the U.S. and South Korea and not pursue further lawsuits for a decade. SK Innovation will also pay LG Energy Solution $1.8 billion in cash and royalties.

Not resolving the dispute would cause more harm than thousands of lost jobs in Georgia, it threatened the whole country's progress in curbing climate change with its EV efforts. For now, electric vehicles make 2% of new auto sales but the Biden administration is determined to shift away from gas-powered engines.

If no settlement was reached, the Biden administration may have had to overrule the ITC in order to allow SK Innovation to build the plant as otherwise, Volkswagen and Ford would have had to find new battery suppliers with diminished bargaining power which would have delayed new model releases and hampered their EV progress. But doing so would harm its relationship with LG Chem that has a joint venture with General Motors Company GM, with at least one more planned with, along with its other major clients such as Tesla Inc TSLA.

Joining Forces With To Build A Strong EV Supply Chain 

Jong Hyun Kim, CEO of LG Energy Solution, and Jun Kim, CEO of SK Innovation, said in a joint statement that the firms would "compete in an amicable way". The two South Korean battery makers are dedicated to work together to support the Biden administration's climate agenda and to develop a robust U.S. supply chain. The United States need a strong, diversified and resilient EV battery supply chain to create good-paying jobs and lay the groundwork for an EV future. The president's EV proposal also involves installing at least 500,000 charging stations across the country within less than a decade, incentives for Americans to purchase EVs along with funding to equip factories with the new technology and take care of the domestic supply of materials.

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