Korean battery industry braces for Trump’s possible reelection in 2024

Former U.S. President Donald Trump reacts to supporters during a commit to caucus rally in Iowa, Dec. 19. AP-Yonhap

Korean electric vehicle (EV) battery makers and materials suppliers are expected to reach a crossroads in 2024, the biggest voting year in history, as more than 70 countries are scheduled to hold elections, according to industry officials, Friday.

Those companies are especially keeping a close watch on the U.S. presidential election that will take place in November, as a growing number of voters are supporting former President Donald Trump, who holds a negative stance on the EV industry.

“There exists the possibility of former President Trump winning the presidential election, so we have analyzed the potential impact of the scenario,” LG Chem CEO Shin Hak-cheol told reporters on Dec. 19, when the LG Energy Solution’s (LGES) parent firm started the construction of its cathode materials plant in Clarksville, a city in the state of Tennessee.

An official at another Korean battery materials company also said on condition of anonymity that it is difficult to rule out the possibility of Trump’s reelection and the subsequent consequences for his company’s investments in the U.S.

“We are drawing up a contingency plan to cope with Trump’s reelection,” he said.

In his second-term agenda, which is better known as Agenda 47, the strongest Republican candidate vowed to abolish the Joe Biden administration’s EV-friendly policies.

Trump also said he would scrap the Inflation Reduction Act (IRA), which has attracted many Korean EV battery makers and materials suppliers to build factories in America with the aim of receiving handsome tax incentives. LGES and SK On have already reflected considerable amounts of advanced manufacturing production credits (AMPCs) in their operating profits in 2023.

Securities analysts warned that the Korean battery industry will grapple with uncertainties until the U.S. presidential election has been decided.

“Although there is a slim chance of Trump abolishing the IRA, his administration may reduce incentives for the EV sector,” Hi Investment & Securities analyst Chung Won-suk said. “If he eases regulations on corporate average fuel efficiency (CAFE) and carbon emissions, carmakers could become more lukewarm about switching to EVs, amid the industry's worsening profitability.”

According to the Korea Trade-Investment Promotion Agency, the combined annual production capacity of the North American factories of LGES, Samsung SDI and SK On will reach 428.5GWh in 2025, as the top three EV battery makers have accelerated their expansions in the U.S. and Canada.

Considering their average capital expenditure is $100 million per GWh, their combined capital expenditures in North America will likely reach $43 billion in 2025.