South Korea Emerges as Gateway for Chinese Firms Eyeing US Electric Vehicle Market

Chinese firms are investing in South Korea's battery industry to gain exposure to the U.S. market, leveraging Korea's free-trade agreement with the U.S. and potential tax breaks under Biden's Inflation Reduction Act.

Over the past four months, Chinese and Korean companies have announced $4 billion of investments in five new battery factories in Korea, with talks ongoing for more projects, Bloomberg reports.

Also Read: Tesla Supplier CATL Prepares To Monetize EV Batteries Under M3P Technology As Competition Heats Up

Chinese company Ningbo Ronbay New Energy Technology won approval to set up a factory in Korea to produce 80,000 tons of ternary precursors annually. This precursor is an essential ingredient used in forming cathodes for batteries.

In March, Korea's SK On forged a joint venture with a Chinese firm to build a precursor factory. China's Zhejiang Huayou Cobalt Co agreed to joint ventures with a chemical subsidiary of LG Group and Posco Future M Co.

Chinese companies dominate the global battery supply chain, supplying cathodes, anodes, and precursors to Korean EV cell manufacturers who, in turn, supply carmakers like General Motors Co GM, Tesla Inc TSLA, and Volkswagen AG VWAGY.

The Biden administration aims to reduce U.S. dependence on Chinese companies in the supply chain, but the deeply rooted presence of Chinese firms makes this problematic. 

Partnerships with Chinese firms can be risky due to potential IRA tax benefit exclusions, but Korean companies believe maintaining partnerships with China is necessary for EV production.

Korean companies may learn about battery technologies in this growing industry from their Chinese partners.

Some analysts believe that the U.S. cannot wholly exclude Chinese firms from the EV supply chains, making Korean partnerships with Chinese companies likely to continue for the time being.

Korean companies might imbibe their Chinese partners about battery technologies.

In 2023, Tesla supplier LG Energy Solution Ltd shared plans to invest 7.2 trillion won ($5.5 billion) in building a manufacturing complex in Queen Creek, Arizona.

Photo by Henrix_photos via Pixabay

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.