Battery Sales Top 5 Tril. Won in 1H20

Models show LG Chem’s pouch batteries for plug-in hybrid EVs (left) and pouch batteries for EVs.

LG Chem's battery business accounted for 37.2 percent of the company’s total sales of 13.664 trillion won in the first half of 2020, LG Chem said on Aug. 17.

The battery division’s share in the company’s sales stood at 30.8 percent in 2019, surpassing the 30 percent mark for the first time. This year’s share represents a 12.8 percentage point increase compared with the first half of 2018.

Of the company’s total operating profit (777.5 billion won) in the first half of 2020, 13.3 percent, or 137.5 billion won, came from the battery sector.

In contrast, the proportion of the petrochemical business, the company’s traditional flagship business, has contracted. The division’s share fell from 61.2 percent in 2018 to 55.3 percent in 2019 and 49.3 percent in the first half of 2020.

The company’s high-tech materials business accounted for 7.8 percent of the total sales while the life science business took up 2.3 percent. As the petrochemical business is in a long-term recession, batteries are becoming a new flagship business.

LG Chem invested 1.714 trillion won to expand battery plants in Poland and China in the first half alone.

Its production capacity in the battery sector, including automotive batteries, swelled to 14 trillion won due to increased investment at home and abroad. This is a 57.0 percent increase from the same period of 2019.

However, due to the effects of the COVID-19 spread, the battery production line’s operating rate in the first half of 2020 hit 51.8 percent, the lowest level. The operating rate was 67.0 percent in 2017, 64.0 percent in 2018 and 57.3 percent in 2019.

Meanwhile, LG Chem and China's CATL are competing for first place in the global electric vehicle battery market. Tesla of the United States is expected to develop batteries on its own. Tesla announced that it will hold "Battery Day" on Sept. 22, but it has not revealed what it will show at the event, fueling speculations.

Some market watchers predict that Tesla will announce a plan to develop its own batteries or unveil the “million mile battery,” which it is developing together with China's CATL. There is also speculation that it may present full-solid battery technology that surpasses lithium-ion batteries in performance. Any of these are bad news to Korean battery makers including LG Chem.

In particular, Tesla and other carmakers are pushing to develop their own batteries to cut costs and secure stable battery supply, which will inevitably bring a big change to the battery market.

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