New US EPA rules draw mixed reactions from Korean companies

Battery makers welcome changes; carmakers express concerns

By Park Jae-hyuk

Korea's electric vehicle (EV) battery manufacturers have welcomed the Biden administration's stricter vehicle emission regulations, which could push EVs to account for at least 67 percent of new light-duty vehicle sales in the U.S. market by 2032, according to industry officials, Thursday.

In contrast, domestic carmakers expressed concerns about potential difficulties in meeting the standards.

On Wednesday (local time), the U.S. Environmental Protection Agency (EPA) announced the new guidelines, intended to reduce emissions of carbon dioxide (CO2) and other pollutants gradually over the next six years.

“Together, these proposals would avoid nearly 10 billion tons of CO2 emissions, equivalent to more than twice the total U.S. CO2 emissions in 2022, while saving thousands of dollars over the lives of the vehicles meeting these new standards and reducing America's reliance on approximately 20 billion barrels of oil imports,” the EPA said in a press release.

Battery firms expect the new rules to increase demand for their products. They have already been considered as main beneficiaries of the U.S. government's continuous efforts to supply more EVs, being able to receive tax benefits in accordance with the U.S. Inflation Reduction Act (IRA).

“By taking advantage of the environmental policies of major countries, we will enjoy the benefits strategically, while contributing to the global efforts to reduce carbon emissions,” a local battery industry official said on condition of anonymity.

Eugene Investment & Securities analyst Han Byung-hwa also regarded the tougher emission regulations as good news for Korean battery makers, saying U.S. carmakers' transition to EVs has become more apparent.

Carmakers that have relied heavily on sales of vehicles using internal combustion engines, on the other hand, have been forced to speed up their investments in EV production.

Last year, EVs only accounted for 3.9 percent of cars sold by Hyundai Motor and Kia in the U.S.

Although Hyundai and Kia aim to raise the proportions to 58 percent and 47 percent respectively by 2030, they must put forward their plans to improve their EV production capacities, in order to satisfy the U.S. government's request.

Other Korean vehicle manufacturers, such as KG Mobility, which was formerly SsangYong Motor, are also expected to face pressure to secure cash for their transition to EV manufacturing.

“It will be difficult for Korean carmakers to satisfy the new EPA rules but they have no choice but to make all-out efforts for their continuous operations in the U.S. market,” an automotive industry official said on condition of anonymity.

Some experts, however, did not rule out the possibility of the U.S. government easing the regulations.

“The EPA's rules are administrative orders, so the Trump administration previously nullified Obama's strict emission regulations,” Han said. “If the Republicans seize control of the White House and Congress, they could ease the proposed standards.”

Kim Pil-soo, a professor at Daelim University's automotive engineering, also noted that if General Motors and Ford Motor fail to measure up to the strict new environmental standards, the U.S. government will have no choice but to revise its regulations.