South Korea to expand investment tax credit for EVs, H2

South Korea plans to further extend its national strategic technology investment tax credit to certain investments in electric vehicle (EV) and hydrogen technology and facilities, in a bid to encourage greater investment in these sectors.

It previously said it is expanding the scope to be eligible for the tax credit to all mineral processing for secondary batteries. This may now also include certain investments in EV and hydrogen technology and infrastructure.

The scope is now to include five future mobility technologies and three facility types, including EV production facilities, as well as EV charging technology and facilities. A further five hydrogen technologies and facilities are also poised to be included.

The country previously raised the investment tax credit rate from 8pc to 15pc for larger companies and 16pc to 25pc for small- and medium-size firms to stimulate domestic investments in national strategic technology. A temporary 10pc of additional investment tax credit for incremental investment expenditure in 2023 was also offered, according to a Korean tax update published by PricewaterhouseCoopers in April. This brings the potential investment tax credit for investments in national strategic technology up to 25pc for larger firms and up to 35pc for small- and medium-size firms.

This proposed amendment is scheduled to be implemented in early June, according to the announcement, but it will likely depend on the progress of the required legislative procedures.

The government more recently announced its plan to quadruple domestic production capacity of secondary battery cathode material from 380,000t to 1.58mn t, as well as to invest 20 trillion won ($15bn) by 2030 to commercialise solid-state batteries.

Global EV sales are forecast by Argus to grow to more than 40mn units/yr by 2030, which will drive up lithium demand. Argus forecasts global lithium consumption to be 2.78mn t/yr by 2030, which will outstrip total lithium supplies from expected capacity and recycling by almost 530,000t.

Multiple support measures and initiatives have been pushed out by South Korea's government in a bid to advance its domestic EV and battery industries, with a public-private joint strategy announced on 7 April and multiple new budgets announced in February.

The Korea Automobile Industry Association called for greater government support in March, asking for "ground-breaking investment support measures" in the face of trade protectionism to support the domestic EV industry.

The country in March imported 4,490t of lithium carbonate, down by 6.3pc from a year earlier. But its imports of lithium hydroxide more than doubled to 11,905t.

By Joseph Ho