Global demand for electric vehicle (EV) batteries will far exceed supply starting in 2023, according to market research firm SNE Research.
Currently, EV battery manufacturers are not making money, but they will be able to make a huge profit four years later.
The global EV battery market is experiencing a supply excess now. This year, global supply is estimated at 326 GWh, surpassing the demand forecast of 190 GWh, according to SNE Research. However, demand is expected to triple to 458 GWh in 2021 from this year and double to 916 GWh in 2023 from the 2021 level. In particular, EV battery demand will exceed supply for the first time in 2023, reaching the state of “excess demand.” Such a situation is forecast to continue until 2029 so EV battery suppliers will be able to ride on a “super cycle.”
The expansion of EV battery demand is largely due to the policy in many countries to increase the supply environment-friendly vehicles. China is planning to increase EV supply to 5 million units until next year, while the European Union (EU) will raise the proportion of EVs in total car sales to 30 percent by 2030. The United States is planning to supply 3.30 million EVs to eight states by 2025, while Japan and India are also seeking to increase the proportion of EVs in total car sales to 30 percent by 2030. The International Energy Agency (IEA) said that the size of the global EV market will reach 3.10 million units in 2017 and jump to 120 million units to 280 million units in 2030.
However, investment in EV battery production facilities is not enough to meet such market demand. Germany’s Volkswagen plans to invest 1 billion euros (US$1.11 billion or 1.33 trillion won) to produce its own EV batteries. It is in talks with South Korean firms to establish a joint venture to secure related technologies. Yet other major automakers are not ready to push into the EV battery market. Especially, German and U.S. automakers which have grown in size based on diesel locomotives have a low level of expertise in EV battery production despite their high level of car assembly technology.
This gives South Korean companies, including Samsung SDI and SK Innovation as well as LG Chem, a decent chance of leading the global EV battery market. Industry insiders expect the supply capacities of LG Chem, Samsung SDI and SK Innovation to exceed 140 GWh, 123 GWh and 60 GWh, respectively, in 2023. It means that South Korean firms will account for one third of the 916 GWh of global EV battery demand forecast for 2023. As the three companies are known to be more advanced in technology compared to China’s CATL and BYD, which currently rank first and second in terms of global market share, they are expected to be the most sought firms by global automakers.
However, there are concerns that the competitiveness of South Korean EV battery firms can be weakened due to various variables. LG Chem sued SK Innovation in the United States for alleged infringement of trade secrets last month. This could damage the public images of the companies involved and cause technology leakage. An official from an EV battery manufacturer said, “It seems that only top five or six companies in the battery market will survive after a few years, like the semiconductor market. So it is important to remain competitive for the next few years by cutting costs and advancing technology.”