According to the South Korean newspaper, "Chosun Ilbo," Hyundai Motor Group has urged the U.S. government to provide temporary "exemptions" and not exclude key materials procured from China from the subsidy eligibility under the "Inflation Reduction Act." The company stated that it is currently "unrealistic" to not source raw materials from China.
Starting in 2024, the United States has further tightened the "Inflation Reduction Act," stipulating that electric vehicles produced in the U.S. that contain battery components manufactured or assembled in countries such as China will no longer qualify for the up to $7,500 tax credits provided by the U.S. Inflation Reduction Act (IRA).
Under the new regulations, effective from 2024, electric vehicles eligible for the tax credit must not include any battery components manufactured or assembled by "foreign entities of concern (FEOC)," and starting from 2025, eligible electric vehicles must not contain any key minerals extracted, processed, or recycled by FEOC.
Data indicates that 80% of electric vehicles previously benefiting from subsidies in the U.S. used batteries from South Korean companies, with a concentration in the three major players: LG New Energy, SK On, and Samsung SDI.
However, South Korean battery companies are even more dependent on raw materials from China. In the field of key minerals and processed products required for manufacturing power batteries, South Korea's imports from China account for up to 96.4%. The import value from China by the three major battery companies represents 77% of South Korea's total imports.
Therefore, with the upgrade of the new U.S. regulations, the first to bear the brunt is not Chinese companies but rather South Korean companies.
Hyundai Motor Group pointed out that as of 2022, China produces and refines 100% of spherical graphite and 69% of synthetic graphite globally. It is unlikely that other countries will find alternative solutions in the short term. In response, Hyundai suggests that the U.S. formulate a list of key minerals for manufacturing power batteries and their components, which is not restricted by the country of origin and can be temporarily used. Graphite should be included in this list.
