Battery Industry: "Not a Korean U-Turn but a Competition for US Market Share" (Comprehensive)

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

The first plant of 'Ultium Cells,' an electric vehicle battery joint venture established by LG Energy Solution and General Motors (GM), under construction in Rose Town, Ohio, USA. (Image source=Yonhap News)

[Asia Economy Reporter Moon Chaeseok]

"Instead of focusing on reshoring battery companies (bringing overseas enterprises back to Korea), the urgent priority is for the government to support the competition for securing key battery raw materials like lithium. In the battery industry, if you are not 'right next to' the major OEM (Original Equipment Manufacturer) factories of leading automakers, you simply cannot win orders. Among the three major markets?China, Europe, and the United States?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 an early stage, focusing all efforts on building joint battery plants for electric vehicles. In the market, given the relatively small size of the domestic electric vehicle market, there are calls that it is not the time to demand reshoring based on Korea’s employment and investment status, but rather that policy support is needed to allow companies to concentrate on next-generation battery research and development.

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, and separately invest 1.7 trillion KRW to establish a standalone battery plant (11GWh) in Arizona, USA. 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 at least 447GWh of battery production capacity 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 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 insider 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." They added, "It is true that the battery industry has been relatively free from criticism regarding sluggish domestic investment." Another insider said, "Now is the time to think about how to compete and win against Chinese battery companies (in the U.S.) rather than moving production bases back to Korea. From an employment perspective, overseas sales personnel hired through public and occasional recruitment in Korea 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 also 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 electric vehicle 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 'Federal Acquisition Regulation.' The law stipulates that 'products purchased by the federal government must be substantially made within the United States.' 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.