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Automakers’ Production of EV Battery Gives Huge Pressure on Battery Producers
Vertical Integration
Automakers’ Production of EV Battery Gives Huge Pressure on Battery Producers
  • By Jung Min-hee
  • May 15, 2017, 02:30
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Automakers are internally producing batteries, core components for electric vehicles (EV), in earnest.
Automakers are internally producing batteries, core components for electric vehicles (EV), in earnest.

 

As automakers are internally securing batteries, core components for electric vehicles (EV), in earnest, some points out that domestic battery producers, such as LG Chem and Samsung SDI, should essentially reestablish their supply strategies for automakers.

According to foreign media and battery industry sources on May 14, General Motors (GM) will construct a battery assembly factory in Shanghai, China, this year. The company plans to establish a joint venture with its partner Shanghai Automotive Industry Group and battery manufacturer CATL and supply batteries to Shanghai GM, its production base in China.

Germany’s Volkswagen will build an EV battery plant with a production capacity of 1 million units by 2025. Also, Germany’s Daimler AG has officially announced to invest 1 billion euros in developing EV battery technologies. Tesla has been constructing “Gigafactory” with an annual production capacity of 500,000 units in Nevada of the U.S. with Panasonic, the world’s largest EV battery supplier. China’s BYD is also expected to build a new battery manufacturing plant in Qinghai and spin off its battery business unit.

Automakers are accelerating the internal production of EV battery so that they can take the leadership in an upcoming era of electric mobility. With a rapidly growing EV market, it has become more important to secure the competitiveness in batteries, which account for up to half the total EV cost. The EV market, which hit 2 million units, including hybrid vehicles, in 2015, is expected to grow to 10 million in 2020 and 23 million in 2025. The EV battery market is likely to grow from 9 trillion won (US$7.97 billion) last year to 19 trillion won (US$16.83 billion) by 2020.

The latest move by automakers is a huge pressure on domestic battery producers. Since LG Chem supplies battery cells for the Chevy Bolt EV, the company is not happy with GM’s latest decision.

An official from the battery industry said, “GM is considering vertical integration in order to secure stable supplies. When GM eventually succeeds in internalizing batteries, LG Chem will have to secure another customer company.” Samsung SDI, which supplies batteries for Volkswagen’s new eGolf EV, and SK Innovation, which does business with Daimler, also cannot rest under these circumstances. In particular, SK Innovation built a joint venture Beijing BESK Technology with Beijing Automotive and Beijing Electronics but the Chinese battery production plant has stopped operation due to the Chinese government’s regulations.

Park Soo-hang, a senior analyst at POSCO Research Institute, said, “Automakers have a strong desire to internalize parts, including batteries, so there is no question that it is one of the mainstays of the general trend.” Experts also points out that domestic battery producers should actively seek to establish new partnerships like Tesla and Panasonic.