Ahead of the Nov. 3 U.S. midterm election, the tax-credit defence line secured by Korean battery makers is again emerging as a subject of political negotiation. EV purchase subsidies have already been abolished. The advanced manufacturing production credit (AMPC), which underpins earnings at the three battery makers, was defended in last year’s Senate revision bill by maintaining a 25 percent credit through 2032. But if the balance of power in Congress changes after the election, the level of that defence line could also change. LG Energy Solution, Samsung SDI and SK On, which have built large production bases in North America, are accelerating a shift toward business structures that are not shaken by policy variables ahead of the vote.

According to U.S. local media and polling organisations, the race is moving in a direction unfavourable to the ruling Republican Party. President Trump’s job approval rating has fallen to the low 30 percent range due to the prolonged Iran war and the impact of higher oil prices, the lowest level on record for a re-elected president. In U.S. midterm elections, the ruling party increased its seats only three times out of 41 elections since 1862. Parties of re-elected presidents with approval ratings below 50 percent mostly lost seats in elections held in the sixth year of the term.

Depending on scenarios for the composition of Congress, Korean battery makers’ calculations also diverge. In this election, 35 of the 100 Senate seats will be newly elected, and Democrats would become the majority if they take four seats. If Democrats regain either the House or the Senate, additional legislation to cut tax credits would likely be checked, raising the chance that the current AMPC defence line is maintained.

If Republicans hold both chambers, tax reform aimed at securing funding for tax cuts could be pushed again. Given a precedent in which a 2025 House bill sought to bring the AMPC end date forward to 2031 but was reverted to the status quo during Senate coordination, room remains for a reduction card to be raised again.

Just as Bloomberg Intelligence ahead of the 2024 presidential election saw the probability of maintaining EV tax credits at 30 percent if Trump won, and the purchase subsidy in fact moved toward abolition, election results have determined whether support measures survive. Even for the defended AMPC, a condition remains that procurement from prohibited foreign entities (PFE) such as China must be tightened in stages, from 40 percent in 2026 to 15 percent in 2030 to 2032.

Against that backdrop, the three Korean battery makers have made it a shared task to build structures that can sustain utilisation rates without policy support, and this year they have steadily pushed ahead with standalone plants and converting lines to energy storage systems (ESS).

First, the three companies are unwinding joint-venture structures tied to automakers and shifting to standalone operations. Samsung SDI last month acquired all of General Motors’ 49.99 percent stake in its Indiana joint venture, Synergy Cells, securing its first standalone production base in North America. LG Energy Solution in February acquired Stellantis’ stake in its Canadian joint venture NextStar Energy, and also bought assets of the third Ultium Cells joint-venture plant with GM for about 3 trillion won. SK On in May reorganised its joint venture with Ford, BlueOval SK, and shifted the Tennessee plant to standalone operation.

Moving to standalone plants is also expected to increase operational autonomy. Under the previous joint-venture structure, plant utilisation was tied to the partner automaker’s sales performance, and changing the use of production lines required consultation due to the equity structure. After the shift to standalone operations, the companies can decide for themselves whether to allocate lines to EVs or ESS, and AMPC tied to U.S. production accrues in full.

In particular, SK On’s second-quarter profit swelling to the largest among 19 quarters since its spin-off was largely influenced by increased AMPC benefits as it began operating the Tennessee plant on its own following Ford’s withdrawal. SK On has about 100 GWh of local production capacity by combining its standalone plants SK Battery America and Tennessee with a joint-venture plant with Hyundai Motor Group.

It is expected to actively use the expanded capacity to fill it with ESS. That means EV facilities that previously faced concerns about idle capacity are being converted into a production base for ESS orders. In the first half of this year, North American lithium-ion ESS shipments totalled 75.9 GWh, up 83 percent from a year earlier. Demand from artificial intelligence (AI) data centres and power grids is filling the space left by EVs.

LG Energy Solution converted existing EV lines for ESS, lifting second-quarter ESS sales to 4.6 times a year earlier, and it plans to expand North American ESS production capacity to more than 50 GWh by year-end. SK On agreed to supply NeoVolta Power in the United States with 9 GWh of lithium iron phosphate (LFP) batteries for ESS over five years starting in 2027, and the volume rises to 18 GWh if additional cooperation is concluded. Samsung SDI also decided to install an ESS line at the Synergy Cells plant following U.S. ESS supply contracts worth 2 trillion won in December last year and 1.5 trillion won in March this year.

The shift also reduces the burden of new investment. That is because it turns existing EV lines rather than building new plants. LG Energy Solution operated ESS production lines in May to June at its second joint-venture plant with GM and its joint-venture plant with Honda, and the value of new orders in the first half exceeded 3 trillion won, including hyperscaler AI data centre projects. The volume SK On will supply to NeoVolta Power will also be produced at its Georgia plant.

AMPC reliance remains a task... "We just need to avoid the worst-case scenario"

That restructuring also carried into results. In the second quarter, LG Energy Solution posted 113.3 billion won in operating profit, Samsung SDI 203.8 billion won and SK On 821.8 billion won, as all three recorded profits together for the first time in seven quarters.

Still, a significant portion of those profits depends on policy effects, which is why they must keep their eyes on the November midterm election. North American production subsidies reflected in LG Energy Solution’s second-quarter results were 241.0 billion won, exceeding operating profit, and it posted an operating loss of 94.5 billion won on a cumulative first-half basis. SK On’s profit surge also combined expanded AMPC benefits from the standalone shift with one-off factors such as compensation from customers. Samsung SDI posted a profit even excluding AMPC, but the improvement in profitability reflected benefits and tariff refunds.

In the end, there is an assessment that whether core profitability recovers depends on expanding ESS volumes in the second half. With tax credits supporting performance, the direction of the tax system after the November election is expected to return as a profit-and-loss variable for the three companies. An industry official said, "Since we have already experienced the abolition of EV subsidies, the mood is not to expect things to get better but to avoid only the worst-case scenario such as an early end to AMPC."