Korea's battery industry said that amid ongoing losses, the effectiveness of tax credits is weak, eroding investment capacity and shaking global competitiveness. Observers noted that the government should prepare practical measures such as a direct refund system for tax credits on investments in national strategic technologies and strengthen national research and development (R&D) investment.
The Korea Battery Industry Association (KIBA) held a National Assembly forum on the 23rd with Democratic Party of Korea lawmaker Lee Yeon-hee, titled "Global battery market changes and a National Assembly forum to secure competitiveness of K-battery industry." The aim was to analyze the crisis facing domestic corporations in the battery industry, where competition among countries is intensifying, and to discuss the need to introduce a direct refund system for tax credits based on policy support cases in major countries.
Park Tae-seong, executive vice chair of the Korea Battery Industry Association (KIBA), said, "If the tariff burden on exports to the United States continues, there are concerns about higher manufacturing costs in the battery industry and weaker export competitiveness," and added, "Amendments to the Restriction of Special Taxes Act, including a domestic production promotion tax credit and a direct-refund tax credit, must pass without a hitch in this regular National Assembly session."
Recently, Korea's battery industry has grown increasingly alarmed as price competition intensifies due to China's oversupply. Chinese corporations, backed by government subsidies amounting to dozens of times those in Korea, have pursued low-cost raw material procurement and large-scale facility buildouts, securing supply chain stability and price competitiveness, while also accelerating technological innovation such as quality development.
Kim Se-ho, senior research fellow at the LG Business Research Institute, said, "Competition in the battery industry has shifted from corporations to a national systems competition," and added, "Domestic corporations face structurally inferior production conditions due to higher electricity rates and resource shortages compared with competitor countries, and they are going through a difficult period because subsidy policies to drive demand for electric vehicles and energy storage systems (ESS) are lacking."
Kim, the senior research fellow, noted that policy support is imperative for domestic corporations to compete on equal terms in the global market. He said policies are needed to strengthen the effectiveness of tax benefits, expand policy finance and its scope, boost national R&D investment, expand battery business infrastructure, and revitalize battery demand industries.
Among them, there are calls to introduce a direct-refund tax credit that allows corporations to receive tax credits in cash for the amounts they invest, regardless of operating profit. As competition among major countries to localize battery production facilities and supply chains intensifies, the burden of indirect expenses on corporations—such as initial investment costs, high raw material price volatility, and costs for labor, electricity, and land and environmental regulations—is growing.
Ahn Jeong-hye, an attorney at Yulchon, explained, "If a direct-refund tax credit is introduced, corporations can plan investment attraction and project financing based on long-term contracts through clear return on investment (ROI) calculations when establishing investment plans, thereby easing uncertainty over initial investment decisions."
Attorney Ahn added, "The government can expect a greater policy effect than simple subsidies because refunds are made only when certain conditions such as production and investment by corporations are met, and since refunds are provided after results occur, it is also easier to forecast the fiscal burden compared with subsidies paid in advance."