China and Germany's Rapid Advance Causes Decline in Electric Vehicle and Battery Market Share... The Answer is Korea-US Cooperation (Comprehensive)

Korean Global Export Market Share
Cars Down 0.8%P, Batteries Down 2%P

China's Rise... Preparing to Enter Korean Market
Local Battery Industry Shows Growth
Volume Competition Essential for Market Dominance
Semiconductor Supply Key to Market Share

Workers at the Hyundai Motor Company Ulsan Plant's Ioniq 5 production line. (Photo by Hyundai Motor Company)

[Asia Economy Reporters Sunmi Park, Daeyeol Choi, Chaeseok Moon] Due to the rapid advances of China and Germany, the global export market share of Korean electric vehicles and lithium-ion batteries declined last year.

On the 8th, the Federation of Korean Industries (FKI) analyzed the electric vehicle and lithium-ion battery industries, which have been growing at an average annual rate of over 20%. According to the analysis, Korea's global export market share of electric vehicles fell by 0.8 percentage points compared to the previous year. Among the world's top five electric vehicle exporters (Germany, Belgium, China, Korea, and the United States), China and Germany increased their shares by 9.5 and 3.8 percentage points, respectively, during the same period.

The nearly 10 percentage point increase in China's global electric vehicle export market share last year is attributed to a 513.9% surge in exports to the EU by Chinese companies such as Shanghai Automotive, BYD, NIO, including Tesla's Shanghai factory, according to the FKI's analysis.

During this period, Korea's global export market share of lithium-ion batteries?used in various applications such as electric vehicles, smartphones, and laptops?also declined by 2 percentage points compared to the previous year. In contrast, the market shares of the world's top five exporters?China (up 2.9 percentage points), Poland (up 1.8 percentage points), Germany (up 1.2 percentage points), and Hungary (up 0.3 percentage points)?all increased.

Notably, the global market share of Chinese battery companies such as CATL, BYD, and CALB rose from 38.4% in 2020 to 48.7% last year, an increase of 10.3 percentage points. Conversely, the combined global market share of Korea's top three battery companies (LG Energy Solution, Samsung SDI, SK On) dropped from 34.7% in 2020 to 30.4% in 2021, a decrease of 4.3 percentage points.

Kim Bong-man, head of the FKI's International Headquarters, stated, "China has established itself as the world's leading electric vehicle powerhouse through abundant battery raw material reserves and policy funding support from the Chinese government for domestic battery companies." He advised, "The new government should strengthen Korea-US cooperation on electric vehicles and batteries, as the US has been rebuilding its battery supply chain since last year."

China's Rise... Preparing to Enter Korea

The decline in the global export market share of K-electric vehicles and batteries last year is interpreted as a result of the aggressive national support-driven offensive by China and Germany. In particular, China is leading the global electric vehicle market based on its powerful domestic market demand and abundant resources.

There are concerns that the technological edge of Korea's lithium-ion ternary battery, which is the focus of the country's top three battery companies, may be caught up by China (CATL), potentially jeopardizing the status of K-batteries in the future. Experts point out the need to strengthen cooperation with the US, which is rebuilding its supply chain, and to provide policy support for targeting emerging markets.

Government Support, Financial Power, Abundant Resources... Reasons Behind China's Rise

China's surge in the global electric vehicle market is largely due to nurturing domestic companies backed by its massive market. China decided early on to focus on electric vehicles, anticipating that catching up with Europe, the US, Japan, and Korea in internal combustion engine vehicles would be difficult. The relatively easier technological gap to bridge and significant influence over the entire supply chain of key raw materials also supported this strategy.

As a result, China has emerged as a legitimate automobile exporting country. Since the early 2000s, China surpassed the US to become the world's largest single market for vehicle production and sales, but it was primarily focused on domestic consumption. Electric vehicles are different. China is increasing export volumes comprehensively, including to neighboring Asian countries and Europe. The Chinese government recently decided to extend electric vehicle subsidies, which were initially scheduled to end this year, and some local governments that had previously abolished subsidies are now reinstating them one by one.

In Korea, some electric models of commercial vehicles such as buses and trucks are imported from China, and some Chinese manufacturers are reportedly preparing to enter the Korean market directly. Considering that Korean companies have virtually no electric vehicle production locally and no export volumes to China, the situation has completely reversed. According to Korea International Trade Association statistics, from January to April this year, Korea exported no electric vehicles to China, while imports from China reached 2,753 units, nearly matching imports from the US (2,781 units).

Riding on the strength of the Chinese electric vehicle market, Chinese battery companies are also showing remarkable growth in the global market. The gap between the world's largest battery company, China's CATL, and the second-ranked Korean LG Energy Solution is widening. Among the top 10 companies, six are Chinese. Korea's LG, SK, and Samsung are holding their ground, but they face challenges such as domestic and international political and economic variables, resource weaponization, and the need to develop next-generation technologies like solid-state batteries and secure price competitiveness.

According to data released on the 2nd by energy market research firm SNE Research, from January to April this year, China's CATL ranked first with a 33.7% usage share (41.5 GWh), and Korea's LG Energy Solution ranked second with 14.9% (18.3 GWh). Considering the market share of the top 10 companies, China holds 55.3%, while Korea holds 25.9%, showing a gap of 29.4 percentage points. This gap has widened more than fourfold compared to last year's 7.8 percentage points difference (China 41.8%, Korea 34%).

However, the market generally expects that the overall electric vehicle battery market will expand significantly in the future, so Korea's position in lithium-ion ternary batteries is unlikely to shrink.

"Global Competition Intensifies... Prepare for a Long-Term Battle"

Experts advise that since the global electric vehicle and battery markets are likely to be long-term battles, preparations should be made with a long-term perspective. Regarding the recent decline in export market share, they diagnose it as a direct hit caused by temporary external factors such as the shortage of automotive semiconductors. They also note that this is not a phenomenon unique to Korea and that it is difficult to conclude that Korea's export market share disadvantage will persist steadily in the long term.

Professor Kim Pil-su of Daelim University explained, "The ongoing shortage of automotive semiconductors and the insufficient supply of electric vehicles and batteries compared to overseas demand seem to have affected our companies' export market share." He added, "With more than ten battery plants operating or under construction in the US, resolving the battery shortage issue will positively impact Korea's export market share expansion." He further noted, "Global demand for electric vehicles and batteries is expected to increase further after COVID-19, so securing semiconductors will be a turning point for export market share."

There is also an analysis that there is no need to be overly concerned about export performance itself. Since exports are recorded only when products made on Korean soil are sold overseas, and supply chains are diversified across the US, Europe, and China, sales performance in regions where Korean companies have local plants is more important. Professor Lee Hang-gu of Hoseo University said, "Because batteries are very heavy, companies are managing their businesses focusing on local production and sales, such as Hyundai's Alabama plant in the US and Kia's Mexico plant, so export performance is not very meaningful."

However, since both electric vehicles and batteries are still in the early stages of market formation, a certain volume is necessary to secure initial market dominance. While competition is likely to be based on 'technology' in the mid to long term, it is expected to be a 'volume' battle for the time being. Around 2025, local battery plants jointly built by Korean battery companies such as LG Energy Solution and SK On and US automakers will be completed.

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