Samsung SDI to hasten US battery plant groundbreaking

Samsung SDI Co., the world's sixth-largest battery maker, is set to push forward the start of its plant construction in the US by two months in response to Washington’s decision to provide tax breaks only to electric vehicles equipped with batteries manufactured in North America.

South Korea's Samsung SDI is scheduled to break ground in October on a joint EV battery factory with Dutch-domiciled multinational automaker Stellantis N.V. in Kokomo, Indiana. The two companies agreed to invest $2.5 billion to build a battery plant to produce 23 gigawatt hours (GWh) of prismatic battery cells and modules a year. Its capacity will be increased to 33 GWh in the future.

They had planned to begin the construction around the end of this year for commercial operations to start the first quarter of 2025 as the United States-Mexico-Canada Agreement (USMCA), which provides tariff benefits for major auto parts produced in North America, is set to take effect in July 2025.

But Samsung SDI decided to hasten the groundbreaking as the US is set to offer tax incentives of $7,500 per EV from next year — but only on those made in North America. 

“Samsung SDI wants to produce battery cells there as soon as possible since it only has a battery pack plant in North America,” said an industry source in Seoul.

“Local automakers are inquiring about battery supply to three South Korean battery makers as they urgently need battery procurement.”

The country is home to LG Energy Solution Ltd. SK On Co. and Samsung SDI.

On Thursday, Samsung SDI President and CEO Choi Yoon-ho met the Indiana delegation including state Governor Eric J. Holcomb, at the company’s plant in South Korea. They were known to have discussed cooperation related to the planned factory in the US including tax benefits ahead of the state government decision on incentives.

LG ENERGY, SK ON SEEK SUPPLIERS OUTSIDE OF CHINA

Samsung SDI’s larger rivals LG Energy and SK On., which are already operating US production bases started checking their supply chains of raw materials, are awaiting a detailed enforcement ordinance of the Inflation Reduction Act signed by US President Joe Biden, which aims to diminish China’s power in the global EV industry.

The law remains ambiguous as it has stipulated only the proportion of key raw materials and components of batteries. It is not yet clear if it excludes batteries with nickel mined in the US or its Free Trade Agreement partners but smelted in China.

The tax credit will be applied to EVs having batteries with more than half their components made in the US or its FTA partners, according to the law. In 2029, all of the parts must be produced there to benefit. The law also requires 40% of battery raw materials to be procured from the US or its FTA partners in 2023. The bar will be lifted to 80% in 2027.

The South Korean battery makers have decided to prepare measures for possible scenarios first and take action once detailed rules are announced. Currently, they are looking for suppliers that can replace Chinese contractors and are checking at what level those suppliers can provide raw materials and components. Suppliers in Canada, Australia and Chile would be supplier candidates since those countries have signed FTAs with the US.

LG Energy Chief Executive Officer and Vice Chairman Kwon Young-soo is discussing measures to increase the procurement of raw materials outside of China. SK On CEO Jee Dong-seob is checking out suppliers in South Korea and other countries to procure raw materials such as graphite, of which Chinese players dominate supplies.

South Korea’s battery materials companies are expected to accelerate their plans for plant construction or production capacity expansions in the US at the request of local automakers.

Write to Hyung-Kyu Kim at khk@hankyung.com
Jongwoo Cheon edited this article.