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The stories that matter on money and politics in the race for the White House
President Joe Biden’s decision not to seek re-election moved oil prices and the US dollar on Monday. For some businesses in Asia, there could be a more lasting impact.
Biden’s decision to abandon his bid for a second presidential term, endorsing vice-president Kamala Harris to take his place, leaves the Democrats’ efforts to stop a victory for Donald Trump in disarray. Asia’s electric-car battery makers are already suffering from the risk of a Trump triumph.
Asia’s battery makers have been building plants in the US in recent years, investing billions of dollars to set up local supply chains. They have also struck joint ventures with US carmakers. South Korean battery maker LG Energy Solution is building its third plant with General Motors in Michigan. Peer Samsung SDI has committed to two plants with Stellantis in Indiana and another with GM. Japanese rival Panasonic has also previously said there were potential plans to invest in a third factory in North America, following a Kansas factory that is under construction.
This boom was fuelled by the Biden administration’s clean energy measures within the landmark Inflation Reduction Act of 2022, which includes reducing carbon emissions as one of its goals. That lured Asian battery makers to the US with uncapped tax credits. US tax credits offered a subsidy of $35 per kilowatt hour (kWh) for locally produced battery cells, $10 per kWh for battery modules and a 10 per cent production cost credit for mining and producing certain battery minerals.
An election victory for Donald Trump, who has vowed to roll back Biden’s clean energy policies should he win the election, would force significant changes to the US strategy of Asia’s EV battery makers.
Battery manufacturers have already been struggling with weaker demand for electric cars globally and fierce price competition from Chinese peers such as CATL. The average selling price of Chinese power cells fell more than 50 per cent between the start of 2023 and December. The resulting squeeze on margins would limit battery makers’ ability to ride out five years of unfavourable US policy.
Shares of LG Energy Solution, Samsung SDI and SK Innovation, parent of SK On, are all down about a quarter this year — and fell further on Monday.
A Harris victory, meaning a lower chance of a drastic overhaul of the current policies, could render that sell-off overdone. But at a time when battery makers are also grappling with potential overcapacity, rising uncertainty about the pay-off on US investments means a rough road ahead.
june.yoon@ft.com
