As Korean battery companies are struggling amid slowing growth in the global electric vehicle market, they are expected to improve their profit margins despite falling sales in 2024.
“This year, LG Energy Solution and Samsung SDI are expected to maintain profit margins in the 5 percent range, while SK on is expected to improve its deficit,” said Oh Ik-hwan, vice president of SNE Research, at the 7th NGBS seminar held at the Gangnam Science and Technology Center in Seoul on March 25. “In 2024 and 2025, sales growth will slow down due to a deteriorating market environment but Korean battery makers’ profit margin will improve significantly.”
Oh cited the impacts of the Advanced Manufacturing Production Credit (AMPC) under the U.S. Inflation Reduction Act (IRA) as the main reason for the improved performance of Korean battery companies. SNE Research expects LG Energy Solution and Samsung SDI to post operating margins in the 10-percent range next year and SK on to switch to profitability. Sales of the three major Korean battery makers are expected to grow by 11 to 16 percent this year and their growth rate will rise 17 to 18 percent next year.
Oh also predicted that the oversupply of batteries will gradually improve and the battery market may be faced with even a supply shortage in 2030. “There are no confirmed plans for battery makers to expand their capacities beyond 2030,” said Oh. “Given the competitiveness of battery makers and new players’ difficulty in acquiring mass production technology, some regions may go through shortages in the short term.”
Experts expect a shortage in the long term as Chinese companies’ plans for expansion in Europe will hardly materialize fully and a lack of technology from startups in Europe. Batteries, in particular, are expected to be in short supply in North America after 2030 as Chinese companies are constrained by the IRA.
However, this projection is based on already announced investment plans and an actual shortage may not occur if battery companies expand production facilities in the future.
SNE Research expected electric vehicle sales (excluding HEV sales) to grow at a CAGR of 15 percent to reach 75 million units in 2035 in the medium to long term. That’s 79 percent of the entire automotive market. Electric vehicle batteries are expected to grow at a CAGR of 17 percent over the same period, reaching 4,760 GWh in 2035.
LG Energy Solutions, Samsung SDI, SK Energy, CATL, BYD, and Panasonic are the six major global battery makers. Their production capacities for batteries for EVs and energy storage systems (ESSs) are expected to ascend from 1,169 GWh in 2023 to 3868 GWh in 2030. Considering that capital expenditures are about US$100 million per GWh, the six battery makers are estimated to have invested US$270 billion in production facilities.
CATL is expected to invest the largest amount at US$72.5 billion, followed by LG Energy Solution at US$41.9 billion, Samsung SDI at US$34.8 billion, SK on at US$36.3 billion, BYD at US$48.6 billion, and Panasonic at US$32.8 billion.