Global Auto Market Shaken by 'Battery Price Reduction' War

Volkswagen Declares Full-Scale Entry into Electric Vehicle Market, Shaking Up the Industry
Key Focus on Lowering Prices through Battery Internalization
Hyundai Motor Group Also Launches All-Out Cost Reduction Effort

Volkswagen Group Chairman Herbert Diess is delivering opening remarks at Power Day on the 16th, where the group-wide roadmap for battery and charging-related technologies is being announced.

[Asia Economy reporters Changhwan Lee, Yujin Jo, Jaehee Kwon] The Volkswagen Group, the world's top-selling automaker, has declared its full-scale entry into the electric vehicle (EV) market, causing significant upheaval in the EV and battery sectors. Volkswagen announced plans to internalize battery production to lower EV prices. Through this, it aims to overturn the global EV market currently led by Tesla.

Lowering battery costs is key to popularizing EVs, so major automakers including Hyundai Motor Group, Tesla, BMW, and Ford are unveiling various strategies such as battery internalization and rental services.

Volkswagen Stock Surges on All-In EV Strategy

On the 16th (local time), Volkswagen's American Depositary Receipts (ADR) listed on the New York Stock Exchange closed up 10.05% compared to the previous session. In Germany, shares surged 20%. Meanwhile, Tesla's stock fell 4.3%, and Ford's dropped 5%. The global EV market, previously led by Tesla, is now shaking following Volkswagen's announcement.

At a press conference held in Frankfurt, Germany, Volkswagen stated, "We will deliver 1 million electric vehicles (including hybrids) to customers this year," and "We aim to lead the EV sector by 2025 at the latest."

Last year, Volkswagen sold a total of 380,000 EVs globally, ranking second behind Tesla's 440,000 units. This year's target is about 2.5 times last year's sales volume.

To achieve this, Volkswagen plans to invest 46 billion euros (approximately 62.1174 trillion KRW) over the next five years in EVs and hybrid vehicles. While solidifying its all-in EV strategy with this announcement, Volkswagen did not specify a date to cease internal combustion engine vehicle production, considering regulatory differences by country.

Volkswagen's aggressive strategy to achieve its goals centers on lowering costs through battery internalization. At the 'Power Day' event held the previous day, Volkswagen announced plans to develop prismatic integrated battery cells starting in 2023 and apply them to 80% of its EVs by 2030. Through developing integrated battery cells and expanding internalization, Volkswagen aims to reduce battery costs by up to 50%.

Volkswagen also announced plans to standardize technologies including hardware, software, batteries, charging, and mobility services. Next year, Volkswagen will introduce models based on the Modular Electric Drive Matrix (MEB) platform, which includes 27 variants, and models based on the PPE platform that supports fast charging. It also plans to develop a next-generation dedicated EV platform by 2025.

Foxconn, Asia's largest contract manufacturer, also officially announced its entry into the EV market on the same day. Foxconn Chairman Liu Yangwei met with reporters in Taipei and said, "As smartphone profits decline, we have been considering entering the EV market," adding, "We will decide on the location of the EV production plant before July." The U.S. state of Wisconsin is currently considered a strong candidate for the EV plant location. This is the first time Chairman Liu has directly mentioned the EV plant location.

The EVs produced by Foxconn will not be under its own brand but are expected to focus on contract manufacturing. Although Liu did not disclose suppliers, he mentioned, "We are currently in talks with U.S. automakers," implying contract manufacturing. Foxconn aims to capture 10% of global EV production between 2025 and 2027.

Automakers Betting Everything on Lowering Battery Costs

Automakers view lowering battery costs as a critical factor directly linked to increasing EV market share. Currently, battery costs account for roughly 40% of the price of an EV. This means nearly half of an EV's price is the battery cost. Analysts say that if battery prices can be drastically reduced, EV prices will fall accordingly, greatly aiding popularization.

Hyundai Motor Group is also focusing on lowering EV battery costs. On the 18th of last month, Hyundai Motor signed a Memorandum of Understanding (MOU) at its technology research center in Hwaseong, Gyeonggi Province, with the Ministry of Trade, Industry and Energy, Hyundai Glovis, LG Energy Solution, and KST Mobility for a pilot project on electric taxi battery rental and the use of 'used batteries.'

According to the agreement, taxi platform operators purchase EVs and immediately sell battery ownership to a leasing operator. The platform operator then pays monthly battery lease fees during the EV ownership period. This is a type of EV battery rental service. If commercialized, consumers will be able to purchase EVs at prices excluding battery costs, which is expected to accelerate EV adoption. Hyundai has not yet announced plans for direct battery production but is keeping the possibility open.

Tesla, currently the world's number one EV maker, is also focusing on reducing battery costs. Tesla plans to produce batteries in-house by acquiring German battery company ATW Automation. At its 'Battery Day' event held last September, Tesla unveiled an innovation plan to drastically reduce battery pack costs within three years.

BMW is building a battery cell pilot plant in Munich, Germany, aiming to start operations next year. Ford also announced in November last year that it is reviewing battery cell manufacturing.

Song Seonjae, a researcher at Hana Financial Investment, explained, "As automakers internalize batteries, the biggest drawback of EVs?the high initial cost?will be alleviated, contributing to market activation. The more automakers decide to internalize batteries, the stronger their bargaining power with battery suppliers will become, increasing the possibility of cost reduction and profitability improvement."

This content was produced with the assistance of AI translation services.