South Korean Battery Titans: Under mounting pressure from clients seeking diversification away from China, South Korean automotive battery manufacturersLG Energy Solution (LGES), SK On, and Samsung SDIare grappling with the challenge of developing more affordable lithium iron phosphate (LFP) batteries. While there’s a commitment to LFP, these companies express difficulty in competing on price, citing concerns about slowing growth in electric vehicle (EV) sales and potential changes in U.S. subsidies, particularly if President Joe Biden loses the 2024 election.
Traditionally proponents of nickel-based lithium-ion batteries for EVs, these firms are now urged by global automakers to delve into LFP batteries. The shift comes as automakers seek to cut costs, capitalize on U.S. EV subsidies, and navigate new regulations limiting Chinese content in batteries eligible for credits. LFP batteries from Chinese suppliers like CATL and BYD are about 20% cheaper than their nickel counterparts.
Despite acknowledging the need for LFP development, the South Korean firms are cautious, emphasizing the importance of pricing competitiveness and profitability. While plans for LFP battery development are in motion, challenges include building a supply chain, especially given the absence of cathode manufacturers for LFP batteries in South Korea.
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The firms plan to accelerate LFP development, with LGES and Samsung SDI targeting mass production in 2026, while SK On has completed development and is in talks with customers. However, matching Chinese rivals’ costs proves to be a formidable task.
Analysts estimate that Korean-made LFP batteries could be 17% more expensive than Chinese products, potentially rising to 40% if produced in the U.S. due to higher labor and infrastructure costs. The South Korean battery makers, having announced significant investments in expanding production capacity, are cautious about aggressive investments, especially with slower EV sales and potential shifts in U.S. subsidies.
As automaker customers delay battery orders to manage EV inventories, it marks a pause in the battery sector, presenting challenges and uncertainties. The looming prospect of Donald Trump‘s potential return to office with plans to cut EV subsidies adds another layer of complexity, prompting South Korean battery makers to evaluate resource allocation across regions. In this evolving landscape, the industry giants find themselves at a crossroads, navigating a delicate balance between technological shifts, market demands, and geopolitical dynamics.”
Our Reader’s Queries
Who are the top Korean battery manufacturers?
The three leading battery manufacturers in South Korea, namely LG Energy Solution Ltd., SK On Co., and Samsung SDI Co., are facing renewed challenges in safeguarding their global market share. This is due to the increasing progress made by Chinese competitors in expanding their reach beyond China. To maintain their position, these companies must take measures to protect their turf and stay ahead of the competition.
How are Chinese battery companies planning to benefit from their joint ventures in South Korea and investments in Morocco?
Chinese battery manufacturers are utilizing joint ventures and partnerships with companies in U.S. free-trade partners such as South Korea and Morocco. This strategy allows them to establish production facilities or invest in these countries, indirectly accessing the U.S. market while adhering to the IRA’s regulations.
In the first seven months of 2023, LGES, SK on, and Samsung SDI collectively held a market share of 23.5 percent in the EV battery market, as per market tracker SNE Research. LGES dominated with a 14.2 percent share, while SK on and Samsung SDI followed with 5.2 percent and 4.1 percent, respectively.