[Reporter’s Notebook] 'Price Parity' Within Reach... Subsidies Needed to Secure Battery Leadership

"This year will be a ‘turning point for future growth’ for us." "We must secure a competitive edge in future technologies." "We need to prepare for and ride the supercycle (period of booming demand)."

When looking at the unified messages from the CEOs of the three major battery companies this year?Kim Dong-myung of LG Energy Solution, Lee Seok-hee of SK On, and Choi Ju-seon of Samsung SDI?a common theme of envisioning the future stands out. It is also notable that despite unanimously declaring ‘emergency management’ due to the electric vehicle chasm (stagnation in demand for a growing industry) causing a dip in growth and profitability, they are still talking about the future and a super boom.

What battery companies are anticipating is that the ‘Price Parity’ point, where electric vehicles and internal combustion engine vehicles reach price equality, is just 1 to 2 years away. Batteries, which account for more than 40% of the cost of electric vehicles, hold the key to reducing the cost of electric vehicles.

According to a report by energy research firm BloombergNEF (BNEF), the average price of lithium-ion batteries last year was $115 per kWh (kilowatt-hour). This represents about a 20% drop from the previous year's average price of $144 per kWh. The industry expects battery prices to fall below $100 per kWh for electric vehicles and internal combustion engine vehicles to reach price parity. If the price is equal to or lower than that of internal combustion engine vehicles, there is no reason not to choose electric vehicles, which offer better driving experiences and a variety of multimedia features. The three battery companies have set a strategy to focus on R&D to compete fiercely on price alongside growth driven by the popularization of electric vehicles.

The main driver accelerating Price Parity is, unsurprisingly, China. By dominating the value chain from raw material supply such as lithium to final electric vehicle production, China has achieved price competitiveness that no other country or company can match. BYD’s recently released electric vehicle, the ‘Qin Plus EV,’ is priced at just over 100,000 yuan (about 19 million won). This means it is possible to purchase a pure electric vehicle for less than 20 million won. In July last year, China surpassed a 50% market share of electric vehicle sales in its domestic market for the first time ever. This competitiveness is backed by strong policy support from the Chinese government. The U.S. think tank Center for Strategic and International Studies (CSIS) analyzed that the Chinese government provided subsidies totaling $230.9 billion (about 325 trillion won) to the electric vehicle industry from 2009 to 2023. A significant portion of this was directly paid to companies in a manner similar to the U.S. Advanced Manufacturing Production Credit (AMPC), which provides production subsidies to eco-friendly advanced manufacturing companies such as battery manufacturers.

What about South Korea? Far from production subsidies, even R&D subsidies are scarce. The combined R&D expenses of the three domestic battery companies totaled 2.009 trillion won as of the third quarter last year, but subsidies received from government ministries such as the Ministry of Trade, Industry and Energy and the Ministry of Environment amounted to only a few tens of millions of won. While astronomical ‘money wars’ are raging worldwide to protect and grow advanced industries, it is no exaggeration to say that our government is standing idly by. A proactive shift in industrial policy is necessary. Support for research and development (R&D) to advance technology in the next-generation electric vehicle and battery industries should be expanded, and financial and tax incentives should be considered to help companies expand production capacity.

Jung Dong-hoon, Industrial IT Department Photo by Jung Dong-hoon

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