The Volt, GM’s flagship electric car in the U.S., is powered by batteries from LG Energy Solutions (Ensol), and Ford’s F150 Lightning is powered by SK on. The batteries of Volkswagen and BMW’s most popular electric cars, the ID4 and i4, are also made by LG Ensol and Samsung SDI, respectively. Korean batteries are dominating the U.S. and European EV markets, two of the top three automotive markets. Excluding China, its share of global EV batteries reached 49% in the first quarter of this year. This is thanks to the world’s top-notch technology, which has been recognized for more than 30 years of persistent investment since 1992.
However, it was in the Chinese market that ‘Korean Battery’ first took on the challenge. The market for electric vehicles, the largest demand for batteries, was beginning to open up in China. It was around 2014. LG and Samsung immediately broke ground on factories in China, but even before they were completed, in May 2015, China announced ‘Manufacturing 2025′ to protect its battery industry. For seven years from the following year, the market share of Korean companies plummeted to 2%, as the government excluded subsidies for batteries made in China. A year before other domestic industries were pushed out of the Chinese market by the THAAD retaliation in 2017, Korean batteries paradoxically became indispensable to the global electric vehicle industry as it turned to Europe and the United States at a faster pace. “Batteries are a prime example of how China’s checks and discrimination have been a boon,” said Lee Ho-geun, a professor at Daedeok University.
In January 2016, the Chinese government announced that it would stop subsidizing electric buses with ternary batteries. It specifically excluded ternary batteries, which were the main focus of Korean companies. On December 29, the last day of the year, five vehicles with LG Ensol and Samsung SDI batteries, which had been included in the subsidy until the morning announcement, were excluded in a revised announcement in the afternoon. “At the time, no one in China told us why they were suddenly excluded,” said a battery industry insider. In those seven years of discrimination, South Korean battery companies have been quick to seize the initiative in the developed markets of Europe and the United States.
◇Turning to Europe and the U.S... winning orders with aggressive sales
When China’s subsidies began to end in 2016, automakers that had planned to use Korean batteries canceled their orders. LG and Samsung’s Chinese factories, which had cost hundreds of billions of won at the time, even ran at less than 50 percent capacity for more than two years. With losses piling up, the companies were desperate to reach Europe, the world’s second-largest EV market. “Marketing executives used to get a hotel room near a European company and sell batteries to purchasing managers, going whenever they called, going whenever they called,” said a senior battery industry source. “Now that Korean batteries have proven their superiority, the relationship has changed and they are asking us for favors.”
“It was a big challenge for us to propose a high-spec battery for an electric vehicle that will be launched in two to three years and complete development and production in the meantime,” said an LG Ensol representative, “but if we don’t win the order and build a record, we can’t win additional orders, so challenge is the only answer.”
The challenge has resulted in trillions of orders in Europe, and the three battery companies have now grown their European capacity to 137.5 GWh, accounting for 63% of the EU market share last year.
In the U.S., the jackpot is even bigger. The ‘Big Three’ (GM, Ford, and Stellantis), who have jumped into the electric vehicle transition to prevent Tesla from dominating the market, sent out a simultaneous call to the three Korean battery companies. In response to this call, the three Korean battery companies have taken over 9 out of 11 battery plants (totaling 382 GWh) that the US Big Three have established or are planning to establish in North America by 2026. By 2025, Korean products are expected to account for 70% of all EV batteries in the U.S., including the Big Three.
◇‘Crazy’ investments
To build a 30GWh battery factory that can make 300,000 high-performance electric vehicles, it would cost 4-5 trillion won. Even in a 50/50 joint venture, the battery company would have to invest more than 2 trillion won in the factory alone. The three companies are investing a total of 44 trillion won in North America between 2019 and 2026. These multi-trillion investments were called “crazy” even in the battery industry. It’s an astronomical amount of money that could be spent if EV adoption is slower than expected or if recalls like fires result in huge payouts. “The Korean battery industry, which boldly invested while Japanese companies were knocking on stones saying ‘EVs are premature,’ won the day,” said Kim Kwang-joo, head of SNE Research. “The Korean battery industry has been a series of bold investments and bets, and we are seeing the fruits of those bets,” said Lee Sang-young, a professor at Yonsei University who worked as a battery researcher at LG. “It was unimaginable in the past that Japanese automakers Honda and Toyota, who had been scorned, would reach out to LG for a battery joint venture.”