[Electric Vehicle Idling in Korea] "Battery, Not Reshoring but Time for the US to Jump In"

Urgent Need for Support of Key Raw Materials like Lithium
US Pressure on China Presents a Golden Opportunity
Efficiency Must Be Improved by Reducing Logistics Costs

On the 17th, visitors attending 'InterBattery 2022' held at COEX in Samseong-dong, Gangnam-gu, Seoul, are examining General Motors (GM)'s Hummer truck equipped with a high-quality nickel-cobalt-manganese-aluminum (NCMA) quaternary battery at the LG Energy Solution exhibition hall. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Moon Chaeseok]

"Instead of focusing on reshoring battery companies (bringing overseas enterprises back to Korea), the government’s urgent priority should be supporting the supply competition for key battery raw materials like lithium. In the battery industry, if you are not 'right next to' the major OEM (Original Equipment Manufacturer) plants of leading automakers, you simply cannot secure orders. Among the three major markets?China, Europe, and the U.S.?the only remaining 'blue ocean' is the U.S., so 'timing' is everything." (Senior executive at Battery Manufacturer A)

The battery industry is deeply concerned about managing raw material risks and is in a desperate situation where it must somehow increase its market share overseas, especially in the U.S., to outpace China. This is why LG Energy Solution and SK On have been working closely with global automakers pushing for electric vehicle transitions from early on, focusing all efforts on building joint battery plants for EVs. In the market, given the relatively small size of the domestic EV market, there are calls that it is not the time to demand reshoring based on Korea’s employment and investment status, but rather for policy support to focus on next-generation battery R&D.

According to industry sources on the 29th, LG Energy Solution announced on the 24th that it will jointly invest a total of 4.8 trillion KRW with U.S. automaker Stellantis to build a battery joint venture plant in Canada with an annual capacity of 45GWh. Separately, it will invest 1.7 trillion KRW to establish a standalone battery plant (11GWh) in Arizona, U.S. Including LG Energy Solution’s existing standalone plants in the U.S., three joint plants with General Motors (GM), and plants in Poland, China, Indonesia, and Korea, the company will have a minimum battery production capacity of 447GWh by 2025. This capacity is enough to equip approximately 5.6 million high-performance pure electric vehicles capable of driving over 500 km on a single charge.

SK On also announced on the 15th of this month that it will establish a 30GWh electric vehicle battery joint venture plant in Turkey with U.S. automaker Ford. Although the exact investment amount was not disclosed, it is estimated to be at least several trillion KRW.

An industry official explained, "From the battery companies’ perspective, the reality is that most major demand companies (automakers) are located overseas, and since they want localization, it is natural to be located near these demand companies." He added, "It is true that the battery industry has been relatively free from criticism regarding sluggish domestic investment." Another official said, "Now is the time to think about how to compete and win against Chinese battery companies in the U.S., rather than relocating production bases back to Korea. From an employment perspective, overseas sales personnel hired through public and occasional domestic recruitment are assigned to local plants, so it also contributes to national employment."

The issue of reducing logistics costs is also an important factor that cannot be ignored. Leading automakers such as General Motors, Volkswagen, Ford, and Renault want fast delivery, so localization is fundamental, and improving logistics efficiency is a key factor in enhancing battery companies’ competitiveness. The message is that American companies want facilities in the U.S., German companies in Germany, and Hyundai-Kia in Korea. An industry insider said, "Establishing local plants in the world’s three major EV markets?China, the U.S., and Europe?has advantages in terms of reducing logistics costs," adding, "Especially in the U.S., where the government is aggressively promoting localization policies, this cannot be ignored." Recently, the U.S. enacted laws such as the 'Buy American Act' and the 'Federal Acquisition Regulation.' These laws stipulate that products purchased by the federal government must be substantially made within the U.S. The federal regulation currently applies a 'substantial' threshold of 55% of total components. The U.S. aims to raise this ratio to 75% in the long term.

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