China's Low-Cost 'LFP Battery' Assault Causes South Korea's Market Share to Drop 6.9%P in One Year... Struggling to Respond (Comprehensive)

Low Performance but Price Competitive LFP
Rising Raw Material Costs Burden, Automakers Show Interest
Battery Top 3 Ponder Mid-Low Price Market Strategies

K-Battery Market Share Drops 6.9% in One Year
CATL and Others Hold Majority in China, Korea at 26.3%

The headquarters building of CATL, the world's largest battery company, located in Ningde City, Fujian Province, China. (Image source=Reuters Yonhap News)

[Asia Economy Reporters Oh Hyung-gil and Moon Chae-seok] American electric vehicle manufacturer Tesla equipped about half of the electric vehicles it produced in the first quarter of this year with lithium iron phosphate (LFP) batteries. Tesla plans to further expand the use of LFP batteries in the future, as diversifying battery materials is crucial for long-term production growth.

Audi, BMW, and others are also pursuing plans to increase the proportion of LFP batteries in their mid- to low-priced electric vehicle models. There are even forecasts that LFP batteries will surpass nickel-cobalt-manganese (NCM) batteries, also known as ternary batteries, to dominate the future battery industry.

The invasion of cheap Chinese-made 'LFP batteries' has begun. Although LFP batteries have slower charging speeds and shorter driving ranges, the number of automakers choosing LFP batteries for their affordable prices is increasing, signaling a shift in the electric vehicle battery market. The Korean battery industry, which has focused on NCM batteries to differentiate itself, now faces the inevitable need to revise its strategies to compete with LFP batteries.

According to industry sources on the 2nd, Chinese battery manufacturers leading with LFP batteries are expanding their market share in China, the world's largest electric vehicle market.

The China Automotive Battery Research Institute reported that 49% of LFP batteries installed in Chinese electric vehicles in the first quarter were products of CATL.

Chinese electric vehicle manufacturer BYD supplied 34% of LFP batteries, with the two companies together holding over 80% market share. CATL, the world's number one battery producer, recorded a 51% market share in the NCM battery market, while LG Energy Solution held only 6%.

CATL's growth foundation, supported by global investment expansion, is based on LFP batteries. CATL plans to secure a production capacity of 550GWh through 10 global manufacturing plants, with the Ningde plant accounting for the largest scale at 171GWh. In March alone, CATL achieved battery shipments of 10.81GWh in China, capturing half of the market share.

LFP batteries are gaining attention because the strategies of automakers aiming to reduce cost pressures and Chinese companies leading with LFP batteries perfectly align.

In particular, although prices of most key battery materials have recently risen, nickel has shown a steep upward trend. Nickel production is concentrated in a few countries such as China and Russia, and the Russia-Ukraine war has disrupted supply chains. In contrast, lithium is produced in various countries, making it relatively safe from supply crises.

However, LFP batteries have lower energy density compared to NCM batteries, resulting in relatively smaller battery capacity, which means they occupy more space and add weight when installed in electric vehicles, a noted disadvantage.

LFP products account for a large proportion of Chinese CATL batteries. (Image source=CATL)

The three domestic battery companies preparing to compete with LFP batteries identify these disadvantages as their killing points.

LG Energy Solution is structuring its competition with the high-nickel NCMA battery it has been mass-producing since early this year. This is a quaternary battery that adds relatively inexpensive aluminum to the existing NCM. The nickel content has been increased to 90% to improve battery output, and cobalt and manganese proportions have been reduced to below 5% each, with aluminum added to reduce manufacturing costs.

Samsung SDI plans to lower costs and secure driving range at premium model levels through nickel-cobalt-manganese (NMX) batteries that exclude costly cobalt and increase manganese content. SK On intends to complete technology development within the year to improve the energy density and fast-charging capabilities of LFP batteries and will proceed with mass production depending on market conditions.

An industry insider said, "Interest in LFP batteries is increasing due to stable supply and price fluctuations of key materials," adding, "The core of battery competition lies in who can quickly produce affordable yet high-performance batteries through diverse material research."

The electric vehicle battery joint venture 'Ultium Cells' factory being built by LG Energy Solution and General Motors (GM) in Ohio, USA. (Photo by LG Energy Solution)

Korean companies' market share is gradually being squeezed by China. Although the three domestic companies showed double-digit growth in battery usage for global electric vehicles (EV, PHEV, HEV) sold in the first quarter, their market share declined due to the rise of Chinese companies.

According to a report released by energy market research firm SNE Research on the same day, the total battery energy capacity installed in electric vehicles registered worldwide in the first quarter was 95.1 gigawatt-hours (GWh), about twice that of the first quarter last year. SNE Research explained that the market has been steadily rising since the third quarter of 2020.

The problem is that China is leading the global electric vehicle battery market. Korea is increasingly being pushed back. Chinese companies, including market leader CATL (35.0%) and third-ranked BYD (15.9%), drove market growth. CATL and BYD's electric vehicle battery usage in the first quarter rose by 137.7% and 220.4%, respectively, compared to the first quarter last year.

Among the three domestic companies, LG Energy Solution recorded a 39.1% increase in usage to 15.1GWh during the same period, ranking second. LG Energy Solution's growth was positively influenced by strong sales of Tesla Model Y (Chinese-made), Volkswagen ID.4, and Audi Q4 e-tron. However, its market share dropped to 15.9% from 22.1% in the first quarter last year.

SK On's battery usage increased by 141.9% to 6.3GWh compared to the first quarter last year, maintaining fifth place with a 6.6% market share. SK On's high growth was driven by increased sales of Hyundai Ioniq 5, Kia Niro EV, and EV6. Samsung SDI's battery usage rose 26.2% year-on-year, supported by strong sales of BMW iX and Fiat 500, but its market share fell by 2 percentage points from 5.8% to 3.8%.

LG Energy Solution's 'Global Five-Point Production System.' It encompasses Korea, China, Poland, and Indonesia, centered around North America. (Source: LG Energy Solution)

The combined market share of the three domestic companies in the first quarter was 26.3%, down 6.9 percentage points from 33.2% in the first quarter last year. Japanese companies, including Panasonic, also showed growth rates well below the market average, resulting in a decline in market share.

Meanwhile, global electric vehicle battery usage in March reached 41.4GWh, 1.7 times that of the same month last year. SNE Research analyzed that it remains to be seen how issues such as China's lockdowns, the Ukraine crisis, and semiconductor supply will affect future electric vehicle sales.

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