Automakers Expected to Take Control of EV Market Gradually
The Korean battery industry is feeling a sense of crisis as automobile manufacturers are planning to produce batteries for electric vehicles (EVs) on their own. As battery companies' influence increases due to a shortage in battery supply, automakers have begun to move to take control of the market, analysts say.
Volkswagen announced on March 15 that it will make unified batteries instead of pouch-type batteries and put them into 80 percent of all electric vehicles it will produce by 2030. Tesla also announced in 2020 that it would produce batteries on its own within three to four years.
This means that both of the world's top two EV makers are planning to produce batteries on their own. Hyundai Motor is also considering producing batteries on its own. It is strengthening its R&D organization to this end. Toyota of Japan is also developing all solid state batteries with the goal of commercializing them in 2025.
It is battery prices that prompted automakers to seek internal production of batteries. Currently, batteries account for more than 40 percent of EV prices. Thus, only when they lower battery prices, they can gain an edge over other companies in the EV market and win price competition with internal combustion engine (ICE) cars.
In particular, if they can produce batteries on their own at a lower price than now, they will be able to put pressure on battery companies to lower battery prices.
Another important reason is that carmakers need to lower their dependence on battery manufacturers. According to SNE Research, battery demand is expected to swell to 1,254 GWh in 2025 due to the explosive growth of the EV market, while battery supply is expected to hit only 1,163 GWh.
In particular, Volkswagen decided to receive batteries from SK Innovation's U.S. plant, but uncertainties in battery supply have been created following SK Innovation’s defeat in the legal battle with LG Energy Solution.
As automakers are starting to move towards internal battery production, they are expected to take back leadership in the EV industry from battery producers gradually. However, some experts say that battery markers still have roles to play in the sense that there is still a big technology gap between automakers and battery makers. Industry insiders predict that it will take at least seven years for carmakers to reach a level where they can produce batteries on their own.