Blue electric vehicle hooked up to battery charger

Ontario, Canada—South Korea’s strategic EV trading partner amid U.S.–China competition

Jason Insu Park, headshot
By Jason Insu Park, Senior Economic Officer, Seoul

There has never been a better time in the trade relationship between Canada and Korea. As a Canadian working for the Ontario Trade and Investment Office (TIO) in Seoul, I am really excited about all of the recent Korean investments in Ontario, the interest in our electric vehicle (EV) sector, and the recent Korean President’s successful visit to Canada. I am also very honoured to be a part of this journey as the Managing Director of this office and plan to leverage the Seoul TIO’s expertise to increase bilateral trade relationships together with the team in Ontario, Canada.

South Korea is geographically located between two trade giants—China and Japan. China has been Korea’s largest trading partner since the bilateral China–South Korea Free Trade Agreement in 2015, and South Korea was China’s third-largest trading partner in 2020. On the other hand, the U.S. is South Korea’s second-largest trading partner and, at the same time, a trusted security partner and ally.

The recent trade conflict between the U.S. and China, which began in 2018, has increased pressure on the U.S. to consider diversifying its supply chains away from China. China is one of the world’s major sources of critical minerals, which are essential inputs for the green and digital economy. They are used in a wide range of essential products, from mobile phones to medical and health care applications and from electric vehicle (EV) batteries to solar panels. To reduce vulnerabilities and increase supply chain resilience, the United States and other jurisdictions like Europe, Japan and South Korea are looking for stable partners and see Canada as one of those countries.

As a trusted supplier of responsibly sourced mining products, Ontario, Canada is already a leading global producer of many critical minerals—including copper, nickel and cobalt—and hosts advanced mineral projects for rare earth elements, such as lithium and graphite. The province plans to leverage its long-standing mining expertise, technology and capabilities and abundant clean energy resources with its new Critical Minerals Strategy. This strategy aims to help advance the development of critical mineral resources and value chains to power the green and digital economy.

Since the supply chain disruption caused by the pandemic and the U.S.–China trade war, South Korea has been building a cooperative relationship with Canada to source core raw materials. This year, the state-run Korean Rehabilitation and Mineral Resources Corporation (KOMIR) signed a memorandum of understanding with Canadian government agencies and companies, including the Saskatchewan Research Council and Natural Resources Canada.

A growing number of Korean companies have also chosen Ontario, Canada as the outpost for their expansions in the North American market. Earlier this year, the Korean battery maker LG Energy Solution (LGES) announced plans to build their first North American EV battery plant with Stellantis in Windsor, Ontario—a more than $5 billion investment slated to open by 2025. Many of their partner companies are considering joining LGES in Ontario’s EV-related ecosystem.

Inflation Reduction Act and its impact on Ontario’s automotive ecosystem

Even though the Inflation Reduction Act (IRA)—signed into law by the U.S. President on August 16, 2022—may draw attention to the U.S., it has the potential to impact Canada in many ways, especially in the automobile and battery sectors.

This act prompts South Korean EV-related companies to consider Canada, and by extension Ontario, as their production base in the North American market.

Ontario stands to benefit from the IRA’s battery content requirements as the law includes Canadian-built vehicles and critical minerals for batteries as eligible for its full EV tax credit. As of 2023, to access the credit, the vehicle must be built in North America, its battery must contain at least 40% mineral content sourced in North America or by U.S. trading partners and 50% of the battery components must be made or assembled in North America. These percentages rise by 10% annually until they reach 100% in 2029.

In response to the IRA, South Korean President Yoon Suk-yeol visited Ontario this past September, and the leaders of the two countries agreed to upgrade its bilateral relationship to a Comprehensive Strategic Partnership and deepen cooperation on critical minerals used to make batteries for electric vehicles.

Even though eligibility for the tax credit is complex and still ambiguous in some parts, I expect more EV-related companies and manufacturers will choose Ontario as their production manufacturing base in the North American market thanks to the province’s incredible automotive ecosystem, its mineral resources wealth, abundant clean energy resources and strong environmental, social and governance (ESG) credentials.

On the eve of the 60th anniversary of the Canada-ROK diplomatic relationship in 2023, our office looks forward to generating more business opportunities between Korean and Ontario-based companies. Whether you’re looking for collaboration or expansion, please contact Invest Ontario or TIO Seoul to learn more about how we can help your business grow.