DAEGU < invest Korea

According to The Korea Economic Daily Global Edition,

All of South Korea’s major municipal governments are gearing up to be considered as the site of a new Gigafactory, Tesla Inc.’s manufacturing base for electric vehicles, components and batteries, after its Chief Executive Elon Musk last month said the country is among the top candidates to build another production complex in Asia.

The central government sees South Korea as competitive enough to have a Gigafactory as the country is home to the major battery and cell material makers such as LG Energy Solution Ltd. and L&F Co. The nation is also a free trade agreement (FTA) partner with Tesla’s key markets.

The Ministry of Trade, Industry and Energy completed collecting information on candidate sites to build a plant of the world’s top EV maker from all 17 major local authorities, according to sources from the government and industry on Thursday. The ministry plans to send the information to Tesla by the end of this year.

“It is a step to give more information by providing more options to Tesla, although the company has already identified some sites,” said an official from the ministry. “We found some competitive sites that we have not even thought of before.”

Tesla currently has only one Gigafactory in Asia located in China, while operating two in the US – California and Texas – as well as one in Berlin, Germany.

South Korea’s local authorities saw the EV maker’s factory as an unprecedented opportunity to boost the competitiveness of their regions. The plant is likely to lead to investments from other global companies.

Those governments showed off their advantages.

Gangneung, a well-known tourism hub on the east coast of the peninsular, said the city is close to ports and has abundant power supplies. Pohang, a key seaport, said it is home to POSCO, the world’s sixth-largest steelmaker, and factories of battery materials producers such as EcoPro BM Co.

Daegu said L&F, which supplies battery materials to Tesla, is located in the city, about 300 kilometers southeast of Seoul. The capital even hopes Tesla to set up the country’s headquarters, facilities related to Musk’s rocket and spacecraft manufacturer SpaceX, as well as a research and development center although it does not have enough sites for Gigafactory.

Tesla needs more factories as it aims to ramp up output to 20 million EVs by 2030 from some 930,000 units last year. In Asia with strong growth potential, it has only one Gigafactory in Shanghai, which is mainly for domestic demand in China, the world’s largest EV market.

South Korea is good for a new production base, given an excellent supply chain including batteries, industry sources in the country said. Tesla may not worry about tariffs for exports to Asia from the country, an FTA partner for the company’s key markets, they added.

In addition, South Korea is an information technology powerhouse, which will be attractive to Musk if he wants to start the business of SpaceX and its satellite internet constellation Starlink in Asia, according to the sources.

South Korean President Yoon Suk-yeol, aware of Tesla’s plan to build a Gigafactory in Asia, asked Musk to build it in the country and the US billionaire responded that he is considering the nation as one of the top candidate locations, according to the presidential office. Musk said he would make the final decision after reviewing investment conditions in other Asian countries, including labor quality, technology level and production infrastructure.

The remarks are, however, just lip service, some industry sources in Seoul said. The local automobile market is not big enough with a forecast of domestic sales of 1.7 million units for this year, while labor costs are higher than those of other countries, especially in Southeast Asia, and unionized workers are tough.

Indonesia, a potential competitor for Gigafactory in Asia, is in a better position than South Korea, given its ample raw materials for batteries such as nickel. The Southeast Asian country is the world’s top nickel producer with the largest reserves.

Musk met Indonesian President Joko “Jokowi” Widodo several times before a discussion with Yoon. In August, Tesla struck a $5 billion deal to secure nickel from the country.

Tesla may not be in a hurry for an Asian plant given changes in the US market, some sources said.

“Tesla has been working to establish a factory in Mexico first since the announcement of the US Inflation Reduction Act,” said one of the sources. The IRA, which was aimed at the development of the US EV industry, offers tax credits to EVs manufactured in North America.

“The company may not make a decision on investments in Asia in the near term.”

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Write to Hyung-Kyu Kim, Ji-Hoon Lee and Il-Gue Kim at khk@hankyung.com

Jongwoo Cheon edited this article.




Source: The Korea Economic Daily Global Edition (Dec. 23, 2022)