A Headwind for Korean Battery Manufacturers
Volkswagen and Toyota announced this month that they would invest 57 trillion won in EV battery production. Their purposes are the same, that is, self-supply. In other words, the two biggest companies in the global automotive industry are planning to produce EV batteries on their own.
This is likely to have a significant impact on the industry. Volkswagen is going to invest 30 billion euros for three years to come in order to produce battery cells on its own. Toyota is going to invest 16 trillion won in battery production and R&D. These investments are two of the biggest in the history of the industry.
This trend is likely to spread across the industry. Ford and SK Innovation recently announced that they would build three EV battery plants in North America at an investment of over 10 trillion won. GM, which is building two plants with LG Energy Solution, is increasing its investment to that end and BMW and Porsche made investments for pilot production and R&D last year and this year.
The self-supply is extremely important for every automaker. This is because the battery accounts for 30 percent to 40 percent of the price of an electric vehicle. Without self-supply, an automaker cannot but share its profit with a battery supplier. Besides, an electric vehicle requires 30 percent to 50 percent less components than an internal combustion engine vehicle, which means automakers’ profitability cannot but fall.
The trend is likely to adversely affect South Korean EV battery manufacturers. Volkswagen and Toyota are aiming to internally procure batteries starting from 2030. Competition is already intense in the EV battery market and the battery manufacturers will have to compete with automakers as well.
Under the circumstances, they are trying to expand their partnerships with automakers. For instance, LG Energy Solution is building plants in the United States and Indonesia together with GM and Hyundai Motor Group. SK Innovation is working with Ford and Hyundai and Samsung SDI is trying to increase its supply to Stellantis and BMW.
One potential obstacle is China. According to market research firm SNE Research, CATL supplied 49.1 GWh of EV batteries from January to August this year to raise its global market share to 30.3 percent. LG Energy Solution, the runner-up, supplied 39.7 GWh to post a market share of 24.5 percent. China is the biggest electric vehicle market in the world and Chinese EV battery manufacturers are fully utilizing their home advantage.