In a recent interview with Bloomberg that was shared with CleanTechnica via e-mail, Shin Hak-Cheol, CEO of LG Chem, spoke about the challenges the South Korean company is facing as it tries to come to terms with the Inflation Reduction Act signed into law earlier this year. That law provides a $7,500 federal tax credit for electric cars whose battery materials and components are sourced from within the US or from favored trading partners. But since China currently dominates both areas, qualifying for the full tax credit will be difficult.
Shin said at the beginning of the interview that his company is keeping a close watch on the potential impact of the new law on costs. “We are trying to take a safe route in terms of keeping ourselves enough room, not skating through the edge of the ice. And I’m hoping that the ice will not break while you’re still skating.”
Here’s an edited transcript of the interview with Shin covering the IRA, rising demand and future plans.
Bloomberg: How well is LG Chem prepared for the implications of the IRA?
Shin: We are giving our commitment to our customers — battery manufacturers and OEMs — that we will be IRA compliant. However, there are some unclear scenarios. If you have all the metal mines owned by a US company, and then you assemble there — that’s clear cut. There are many scenarios in between and those scenarios eventually have to be worked out by the US government. We haven’t figured out every detail yet.
Bloomberg: Will there be enough capacity in supply chains by 2030 to enable OEMs to produce the volume of electric models that they are promising?
Shin: You have to dissect every component to determine what is the supply bottleneck and can it be resolved — by when, by what method? It’s no secret that demand is much larger than supply. You just cannot build factories fast enough. You cannot hire people that fast.
Bloomberg: Suppliers have had to deal with higher raw material costs this year. How challenging is the cost picture over the next few years?
Shin: The cost element is one of many things we are dealing with. We are trying to produce the best quality, and to have stable quality in mass production. That’s by far the most important focus. When it comes to prices or metals, we’re not the only company worrying about that. I think in this kind of a tumultuous situation, you need to make it simple and focus on what you can deliver and control as opposed to trying to fundamentally change what you cannot.
I think the industry at large has to focus on what they can deliver — to kind of calm down, use data and facts, and do the best they can do. If everybody’s doing that in every value chain, then the whole industry will benefit. If one person is trying to solve all the problems, that creates more problems than solutions.
Bloomberg: Will there be a cost premium for supply chains that become completely IRA compliant, or compliant with any similar laws in the EU or elsewhere?
Shin: I don’t know until I see the facts. It is true that the US government is offering some incentives in the form of various tax credits, not just the $7,500 subsidy to consumers who are buying EVs, but also a number of provisions related to tax abatement for manufacturing operations in North America. So whether that will offset some of these things, I don’t know. I think there had to be the realization on the part of whoever enacted the law that it’s inevitable that there will be added cost.
Bloomberg: Is LG looking beyond cathode materials?
Shin: We are looking at all options, all possibilities, though you need an anchor product. We want to be the best cathode supplier in the world — in quality and technology — before we worry about all the other elements. With the joint venture with Toray, we are already parlaying into separators. [Toray and LG Chem entered into a joint venture to manufacture battery separator film together a year ago.]
We already announced during our investor conference that we eventually want to become the world’s best battery materials supplier — like binders and carbon nanotubes.
The Takeaway On LG Chem
LG Chem is not letting the IRA slow down its goal of becoming a major battery supplier for electric cars in America. Just a few weeks ago, it announced it was building a new $3 billion factory in Tennessee and it is strengthening its relationship with General Motors on an almost daily basis. Meanwhile, CATL, the largest battery manufacturer in the world, is finding it hard to gain a foothold in America, which is more and more turning a cold shoulder to Chinese companies.
There’s more to this, of course. The South Korean government and Hyundai Motor Group are feeling blindsided by the IRA and its “Made In America” requirements. No doubt LG Chem is under pressure at home to help other Korean companies benefit from the opportunities available in the US. It’s a delicate dance, one that will require diplomatic skill as well as technological prowess. To the victor will go the spoils, and LG Chem clearly plans to construct a winning strategy for success in the American market.
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