[Interview] "North American Battery Market May Contract This Year... Tesla Supply Chain Has Growth Potential"

Jeong Won-seok, IM Securities Analyst
Possibility of Oversupply This Year
"Growth Potential for Tesla Supply Chain Companies
That Will Survive Even in the Autonomous Vehicle Era"

Jung Won-seok, IM Securities Analyst. Photo by Yoon Dong-joo

With the inauguration of U.S. President Donald Trump, domestic secondary battery companies are feeling increased pressure, and there is a forecast that the North American secondary battery market could contract this year. Analyst Jeong Won-seok of IM Securities said in an interview with Asia Economy on the 22nd, "Last year, the North American secondary battery market grew by only 8%," adding, "If electric vehicle subsidies are significantly reduced, there could be negative growth this year." He advised that in the face of the electric vehicle chasm, competition from China, and Trump-related risks, domestic battery companies must optimize investments and differentiate themselves with breakthrough technologies to sustain growth.

Below is a Q&A with Analyst Jeong Won-seok.

▲The performance of domestic battery companies has not been good. What is the background behind this?

"Electric vehicle demand in North America and Europe has been weaker than expected. In the North American market, even with subsidies for electric vehicles, growth was only 8% last year. In Europe, market share has been taken over by Chinese companies. At one point, Korean companies held 60-70% market share in Europe, but now it has dropped to a level similar to China. Demand is decreasing, but Korean companies have massively expanded production capacity. As a result, utilization rates have fallen, fixed costs have increased, and profitability pressures have intensified. There is even a possibility of oversupply this year."

▲When is electric vehicle demand expected to expand again?

"The stagnation in electric vehicle demand is due to a combination of factors such as price competitiveness, inconvenience of charging, and safety concerns. When these issues improve, the market can grow independently without subsidies. If products that consumers truly value, like autonomous vehicles, expand, electric vehicle demand could increase again, but that will take some time. The demand slump known as the electric vehicle chasm is likely to be prolonged more than expected."

▲When do you expect the profitability of domestic battery companies to recover?

"Given concerns about oversupply, domestic companies will likely need to adopt a conservative approach to facility investments for the time being. We expect demand and supply to balance out around 2027 to 2028, allowing domestic companies to recover profitability."

▲President Trump is advocating for the elimination of electric vehicle subsidies. What are your thoughts?

"We need to see how the U.S. will actually remove subsidies, but if subsidy support is reduced or eliminated, price burdens will increase, and demand in the U.S. electric vehicle market could be weaker than last year. If electric vehicle subsidies are completely removed, there is a possibility of negative growth this year."

▲Can energy storage systems (ESS) offset the electric vehicle market?

"It is true that the ESS market is expanding with the spread of renewable energy, but the market itself is not large. It is about one-tenth the size of the electric vehicle battery market. Moreover, domestic companies are targeting the U.S. ESS market, which is limited. In other ESS markets like Europe, Chinese companies have a strong hold."

▲How do you evaluate the lithium iron phosphate (LFP) batteries being developed by domestic companies?

"It is not easy to overcome price competition with China. The average selling price of ternary batteries produced in China is about $80 per kilowatt-hour (kWh), and LFP batteries are around $50. The average selling prices for domestic batteries are $120 and $90 respectively. Even if an 80% tariff is imposed on Chinese LFP batteries, the price becomes similar to Korean batteries. Additionally, Chinese LFP batteries have excellent performance. The market for Korean LFP batteries is likely to be limited to North America rather than Europe, and more to ESS than electric vehicles."

▲What is the outlook for high-voltage mid-nickel batteries, considered a rival to LFP?

"It is expected to be a very limited market. High-nickel batteries are expensive but have high energy density, while LFP has slightly lower energy density but is cheaper. High-voltage mid-nickel batteries fall somewhere in between, making their position ambiguous."

▲How should domestic companies respond?

"Ultimately, technological differentiation is essential. Just as there is high-bandwidth memory (HBM) in semiconductors and organic light-emitting diode (OLED) in displays, there must be clearly differentiated technology in secondary batteries. We must lead China in next-generation battery technology. However, the problem is that China is also investing heavily in research and development (R&D). Chinese company CATL spends about 3 trillion won annually on R&D, while LG Energy Solution spends about 1 trillion won. To overcome this gap, Korean companies need to engage in more intensive R&D."

▲In which areas can Korean companies take the lead?

"We must lead China in dry electrode processes, solid-state batteries, and silicon anode materials. Samsung SDI has set 2027 as the commercialization target for solid-state batteries, but Chinese companies are aiming to commercialize earlier in 2026. The 46-series cylindrical batteries, which Chinese companies have not yet aggressively pursued, could be commercialized by China as soon as the market forms. Silicon anode materials are also an area to watch. If the silicon anode material ratio can be expanded to 30%, electric vehicle charging times could be reduced to under 3 minutes."

▲Expectations for Tesla have increased since Trump's election. What is your view?

"Just as mobile phones transitioned from feature phones to smartphones, electric vehicles will evolve into smart cars and autonomous vehicles. If electric vehicles are feature phones, autonomous vehicles can be compared to smartphones. As many companies were consolidated during the transition from feature phones to smartphones, leaving only Apple and Samsung Electronics, a similar restructuring is expected in the autonomous vehicle era. Tesla is the most likely candidate to survive. Therefore, domestic companies integrated into Tesla's supply chain have significant growth potential going forward."

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