Challenges from Potential Competitors
Global companies are challenging South Korean battery makers that have continued to show a remarkable growth in the global battery market in the past two to three years. New companies are popping up in Europe which has relatively little interest in the electric vehicle (EV) battery manufacturing industry, while Japanese and Chinese firms are pouring money to expand battery production facilities.
According to industry sources on November 13, Swedish EV battery start-up Northvolt has recently decided to invest 4 billion euro (US$4.67 billion or 5.22 trillion won) to build a 32Gwh battery production line in Sweden by 2023.
Earlier this year, the news came out that Swiss watch maker Swatch Group has been developing an EV battery with its new technology using vanadium. In addition, Dyson, which is called Apple in the U.K., has recently decided to make a 1.5 trillion won (US$1.34 billion) investment to develop an all-solid-state battery, while other European companies, including Bosch, are pushing into the global battery market. In particular, the European Commission plans to announce its roadmap for “EU Battery Alliance” at the EU Clean Energy Industry Forum to be held in February next year. Accordingly, there is an increasing sense of crisis among domestic battery makers.
Currently, the global EV battery market is led by Japanese, Chinese and Korean businesses. According to SNE Research, Japan’s Panasonic ranked first in terms of battery shipment with 7 GWh among global EV battery producers as of September this year, followed by China’s CATL with 4.19 GWh. South Korea’s LG Chem came in third with 3.11 GWh and Samsung SDI fourth with 1.64 GWh. Existing market leaders are boosting their investments in the sector. Panasonic has decided to invest about 1 trillion won (US$893.02 million) in its lithium-ion battery production facilities in the U.S., China and Japan. Tesla is also considering the establishment of its production plant in China. In addition, CATL, which beat BYD in China, will boost its production capacity from 16 GWh this year to 50 GWh by 2020.
Such an intense competition is propelled by expectations that EV battery business will be more lucrative in the future. In the current EV battery market, the supply far exceeds the demand. The production scale of global EV battery makers stood at 100 GWh last year but the actual demand fell short of 50 GWh. In short, it is irrational to make an investment in EV battery production lines. However, companies expect that the demand will exceed the supply three to four years later. So, they are scambling to make a large investment in the sector. Since the competition in the EV battery market will begin in earnest in 2023 when the demand succeeds the supply, companies should be brace for the competition in advance in order to survive.
Domestic battery makers are also making a similar level of investment with global competitors to expand its production capacity and develop technologies. In fact, LG Chem expects to see its EV battery sales reach 7 trillion won (US$6.25 billion) in 2020. The company also plans to expand its current anode and cathode facilities by three times. SK Innovation will increase its production capacity from the current 1.9 GWh to 3.9 GWh next year as well. However, the company needs to secure stable customers first. European automakers are using South Korean batteries instead of Japanese batteries by reason of technology leakage but domestic firms will face a difficult competition when European battery producers become competitive. Japan can also supply products to automakers from the country, while China has the biggest market in the world. An official from the industry said, “Until now, battery manufacturers have been able to survive with its own technology and facility investment. However, the cooperation with domestic car makers will be more important in the future.”