Market expectations are going up for LG Chem, Samsung SDI, and SK Innovation, the trio that represents the Korean electric vehicle (EV) battery industry. Global automakers such as Jaguar and Mercedes-Benz are forced to suspend their car production because of a shortage of battery supply from Korean companies. Battery makers are stepping up their efforts to secure materials needed to ramp up battery production.
Jaguar reportedly plans to stop making the I-Pace electric SUV for a week because of a battery shortage at supplier LG Chem. The production halt will start Feb. 17 in Graz, Austria, where contract manufacturer Magna Steyr makes the I-Pace for Jaguar Land Rover.
“Jaguar Land Rover has adjusted production schedules of the Jaguar I-PACE in Graz due to temporary supplier scheduling issues,” the company said in a statement.
"A battery shortage took place when Jaguar produced more electric vehicles than expected and used up batteries from LG Chem," said an industry insider. "As LG Chem produces batteries based on the orders it receives, it does not have much inventory and cannot deliver more batteries to its clients."
Apart from Jaguar, other automakers including Audi and Mercedes-Benz have experienced a shortage of battery supply from LG Chem. Mercedes-Benz had to lower its sales goal for the EQC, the company’s first mass-market electric car, last month due to supply shortages at LG Chem. In April 2019, a supply shortage at LG Chem caused Audi to delay the deliveries of its first electric car, the E-Tron. The company subsequently cut its production targets for the year because of the delay.
An industry watcher said that battery supply could not keep up with demand as electric car sales swelled more than expected. The EV markets in the United States and Europe are on a steep growth path, and major automakers prefer Korean batteries.
The global EV battery market excluding China was valued at 50.6 GWh in 2019, an increase of 31.8 percent from a year before, according to market researcher SNE Research. LG Chem's battery production volume stood at 12.3 GWh in 2019, up 67.7 percent from a year ago. Its market share rose 5.2 percentage points to 24.3 percent in 2019 from 19.1 percent in 2018. LG Chem stood second to Panasonic, which took up a 48.4 percent share and exclusively supplies batteries to Tesla.
Following LG Chem, Samsung SDI took third place with 4.1 GWh (8.1 percent share), up 22.8 percent from 2018. SK Innovation came in sixth with 1.9 GWh (3.8 percent market share).
CATL, the world's No. 1 battery producer, barely picked up tenth place with a 0.3 percent market share when its sales in China were not counted. The three Korean battery makers accounted for 70.1 percent of the global market excluding China and Tesla. These three companies supply EV batteries to most of the world's major automakers, including Volkswagen, General Motors (GM), Hyundai Motor and Kia Motors, BMW and Daimler.
Under these circumstances, Korean companies are making various efforts to dial up production. Samsung SDI signed an agreement with Glencore of Switzerland on Feb. 10 to procure up to 21,000 tons of cobalt, one of the core materials for batteries, for five years. The company also entered into a contract with Ecopro BM, a Korean cathode material manufacturer, on the same day to set up a joint venture for the production of next-generation cathode materials. The two companies will invest 44.8 billion won and 72 billion won in the joint venture by 2021 for 40 percent and 60 percent stakes, respectively.
SK Innovation signed a contract to purchase 30,000 tons of cobalt from Glencore in 2019. LG Chem made a deal with Belgium's Yumicore in September 2019 to secure 125,000 tons of cathode materials. In 2018, it agreed with China's Huayu Cobalt to establish a joint venture to produce precursors and anode materials for batteries.