Korea offers Tesla ‘active support’ to build Gigafactory there

South Korean President Yoon Suk Yeol met with Tesla CEO Elon Musk in Washington, D.C., today during a six-day visit to the US. The meeting was at Musk’s request to discuss the possibility of building a Tesla Gigafactory in Korea.

Yonhap, a Korean news agency, summarized the meeting, saying that Yoon emphasized that “South Korea boasts world-class manufactured robots and an advanced labor force, making it an ideal location to run a Gigafactory.”

And Yoon was directly quoted as saying:

“Should Tesla decide to invest, we will provide active support in terms of location, workforce and taxes”

In their previous meeting, Yoon had a similar message – that Korea has a world-class automotive industry and that Korea would work to improve regulations to allow for easier foreign investment into the country. We have no transcript of that meeting, but it sounds like he was more direct in this meeting – promising specific direct support to Tesla rather than generalized government action on regulations.

Musk reportedly responded by stating that he expects to visit South Korea and that the country remains a leading candidate for a Gigafactory.

Korea was already on Tesla’s shortlist for potential new Gigafactory locations, and Yoon and Musk met virtually in November to discuss this possibility. At the time, rumors included that Tesla was considering a Gigafactory in Mexico or Canada.

Since then, Tesla has announced that it will build a Gigafactory in Mexico, which might have thrown some cold water on rumors of other locations. But it turns out that Tesla is still interested in other locations as electric car sales are set to see “explosive growth” worldwide in the coming years.

Given Tesla’s goal to expand sales by 50% per year for the foreseeable future, with a potential (and quite optimistic) goal of selling 20 million vehicles in 2030, it’s going to need a lot of factories to get there.

Tesla already operates one factory in Shanghai, which is a relatively short 500-mile hop over the Yellow Sea away from Korea. But in East Asia, a region where half of the world’s population lives, there is certainly room for more than one factory.

Korea is turning out to be a major player in the EV industry. Korean battery suppliers LG Chem, Samsung SDI, and SK On are cooperating with many automakers around the globe, and Hyundai and Kia are among the largest electric vehicle manufacturers.

Plus, Korea is a free trade partner with America, whereas China is not. This could be relevant given the new battery component and critical mineral rules in the Inflation Reduction Act, requiring the domestic or free trade manufacturing of battery components and critical minerals, respectively. While any Korean Gigafactory would primarily serve Asian markets, this could add some flexibility for Tesla in terms of processing or recycling battery minerals.

Korea, in particular, felt spurned by these rules because they also require that cars undergo final assembly in North America (unless you lease them, an interpretation that Korean automakers pushed for). This has caused many Korean automakers to commit to building factories in the US, so having an American automaker establish a factory in Korea would certainly be fair play in response.