Increasing Number
Korean secondary batteries for electric vehicles are expanding overseas with flying colors. However, Korea’s trade balance in secondary batteries has turned into a deficit due to the increasing number of reverse imports of Korean secondary batteries from overseas.
On June 22, the Korea International Trade Association (KITA) said that Korea posted a deficit of US$240 million in secondary battery trade after analyzing import and export statistics of lithium-ion secondary batteries in May. The deficit was the largest on record. This is because Korea’s secondary battery exports dropped by 2.6 percent to US$589 million from a year ago, but Korea’s secondary battery imports ascended by 112 percent to US$829 million.
Korea’s secondary battery trade balance had been in the black every year since 2012 with a surplus of US$1.6 billion. The Korean government began to compile related statistics in 2012. It peaked at a surplus of US$3.429 billion in 2019 and was cut in half to a surplus of US$1.646 billion in 2022. But this year, Korea has posted five consecutive months of deficits. The cumulative deficits have reached US$716 million (about 920 billion won).
A statistical illusion exists in Korea’s secondary battery trade deficits. “Korean battery makers such as LG Energy Solution and SK on often make batteries in their Chinese factories and bring them to Korea,” explains Shin Yong-min, head of the Battery and Electronics Division at the Korean Ministry of Trade, Industry and Energy (MOTIE). “When batteries made in factories in Korea are used in Korean electric vehicles (EVs) and the Korean EVs are exported, they are not included in Korea’s secondary battery export statistics.”
Despite the decline in Korea’s secondary battery exports, Korea enjoyed a year-on-year increase of 17.5 percent in cathode material exports as they reached US$1.19 billion in May. During the same period, Korea’s cathode material exports outweighed its secondary battery exports. While Korea’s exports of secondary batteries may appear to have slowed down compared to the past, the Korean battery industry’s export contribution is still significant as exports of related parts and materials have increased.
Korea’s deficit in secondary battery trade in this year is blamed on the fact that Korean battery makers have no choice but to aggressively scale up overseas battery production. Their local production is advantageous for supplying batteries to automakers in China, the United States, and Europe, the three largest EV markets in the world. Recently, they have been forced to build new battery factories in the United States in order to receive subsidies and avoid regulations under the U.S. Inflation Reduction Act (IRA).
Concerns are being raised about Korean battery makers’ continued offshoring of key industrial production bases in the future although it is a practical choice. Like Korean semiconductor makers, Korean battery makers are faced not only with domestic job creation issues but with technology security issues related to building and running battery factories abroad. In the case of the IRA, geopolitical issues are involved, so Korean battery makers may be exposed to uncertainties at any time depending on changes in the international situation.
Battery supply will be smooth for Korean automakers with overseas production plants and joint ventures with Korean secondary battery companies such as Hyundai Motor and Kia Corp. But for Renault Korea Motors and KG Mobility, which are relatively smaller than Hyundai and Kia, the problem of Korean-made secondary battery supply has become a reality. On June 20 (local time), Renault Vice Chairman Guido Haak met with Busan Mayor Park Heong-joon at the company’s headquarters in Paris, France. “We will invest in facilities for the production of 200,000 electric vehicles per year at Renault’s Busan plant,” Haak told Park in the meeting. “In order for Korean EVs to enjoy the effects of the Free Trade Agreement, they must be loaded with Korean-made batteries, but we are concerned about a shortage of Korean-made batteries,” a Renault Korea Motors official said. KG Mobility plans to use Chinese-made batteries in its EV model to be released this year.