A senior South Korean government official said South Korea is very dissatisfied with the new U.S. regulations on the manufacture of electric vehicles and related batteries, and may consider whether to suspend cooperation with the United States in other fields, such as the chip industry.South Korea plays a key role in initiatives such as the U.S. Indo-Pacific economic framework and Chip 4, a major semiconductor manufacturer.
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Therefore, the U.S. electric vehicle subsidy rule is likely to get a tit-for-tat from South Korea in other areas, thereby undermining the United States’ intention to increase its influence in the Indo-Pacific region.
Officials close to South Korean President Yoon Suk-wyeh have acknowledged that the Yoon Sek-wyeh government believes the U.S. electric-car subsidy measures are unfair.
The official also said that while Seoul has not yet decided whether to link the matter to other issues on the South Korean and U.S. economic agenda, it cannot rule it out in the future.
strongly dissatisfied
The controversy comes from the “Inflation Reduction Act” officially passed by the United States last month, which made new regulations on subsidies related to new energy vehicles. Among them, electric vehicles not manufactured in North America, or vehicles whose electric vehicle batteries do not meet the North American manufacturing ratio and electric vehicle battery raw material minerals that do not meet the North American production ratio will not be able to enjoy the subsidy of $7,500 from the US government.
This is a very disadvantageous condition for auto brands such as South Korea, especially for automakers such as Kia and Hyundai that do not yet operate electric vehicle factories in the United States.
In addition, South Korea’s three major battery makers LG, SK On and Samsung SDI all import most of the key minerals from China, which means that both Korean automakers and their battery makers will be discriminated against by subsidies.
It is one thing to set up a factory, and it is also true to be frustrated. Last year, South Korean investment in the United States totaled $27.6 billion. Thirty-four South Korean companies are expected to create more than 35,000 jobs in the U.S., mostly in the battery industry, according to the Reshoring Initiative, a U.S. lobbying group.
And that’s especially hard for Hyundai, which last year became the No. 2 brand in the U.S. electric car market, behind Tesla in sales. Following Biden’s visit to Asia in May, Hyundai also announced plans to invest $5.5 billion to accelerate the construction of a factory in the U.S. state of Georgia for electric vehicle and battery facilities.
Cheon Seong-whun, a former security strategy secretary under former President Park Geun-hye, said South Korea may feel like it has been stabbed in the back by the inflation bill, which the South Korean government and public want from the U.S. after so much investment. the same amount of economic benefit.
Negotiations in the United States
The U.S. has agreed to negotiate with South Korea on electric vehicle subsidies, South Korea’s trade ministry said on Thursday. And South Korean President Yoon Seok-wyeh is expected to visit the United States later this month, and will continue to discuss the matter.
Before Yoon, South Korea’s chief trade negotiator Ahn Suk-geun will be the first to visit the United States for the Indo-Pacific Economic Framework meeting in Los Angeles on September 8, where he will meet with U.S. Trade Representative Dai Qi.
Separately, South Korean Trade Minister Lee Chang-yang will also visit the United States this month to lobby against the new legislation. It said in August that the legislation had raised concerns in South Korea, Germany and Japan, creating a burden for auto companies to export electric vehicles to the United States.
The Yin Xiyue administration said it was working closely with Washington at various levels to resolve the friction quickly and smoothly. But no specific plan was given.
Important figures have gone to the United States to negotiate, and the US official also said that it will seriously consider South Korea’s demands, but some insiders are not optimistic.
Brendan Boyle, a Democrat in the U.S. House of Representatives, doubts the issue will gain traction before the midterm elections.
“I’m very concerned about the relationship with South Korea. Given that we need to do a lot of other things right now, will the negotiations with South Korea happen before the election or after the election?”