SEOUL, July 8 (Korea Bizwire) — To get faster to an electric future, automakers need lighter, faster-charging batteries, and South Korea wants to take a leading role in the global battery race amid a major technological shift in the automotive industry.
South Korea, China and Japan produce most of the world’s EV batteries, but auto industry giants in Europe and the United States are ramping up efforts to have their own production capacity and develop next-generation batteries to reduce their dependence on Asia.
As batteries are one of the most important parts in an EV, major automakers are pouring money into ensuring an efficient and cost-effective battery supply chain, potentially posing challenges to Korean players in the coming years.
Three Korean manufacturers — LG Energy Solution Ltd., Samsung SDI Co. and SK Innovation Co. — accounted for a third of the global EV market in the first five months of the year, but their combined share has slightly slipped despite strong sales since last year due to toughening competition with Chinese rivals, according to the data by SNE Research.
To shore up support for the private sector and foster the new growth driver, the Ministry of Trade, Industry and Energy announced a comprehensive battery industry support policy to solidify the nation’s leadership in the rechargeable battery sector.
The so-called K-Battery blueprint is aimed at boosting collaborations between companies and the government to develop next-generation battery technology, expand local supply chains and create demand in various areas by expanding tax incentives and R&D spending.
“If chips play the role of the brain, batteries can be seen as the heart that powers the body,” Industry Minister Moon Seung-wook said during his visit to LG Energy’s factory in Ochang, 120 kilometers south of Seoul.
“The government will pour all its resources into fostering (the battery business) as another main economic driver equivalent to the chip industry.”
President Moon Jae-in attended the event to show the government’s commitment to the battery industry, along with LG Energy Solution CEO Kim Jong-hyun and senior officials from Samsung SDI and SK Innovation.
Under the battery road map, the nation’s battery makers and related firms will receive up to a 50 percent tax discount on R&D spending and a 20 percent tax cut on facility investment.
The ministry said it aims to nearly triple battery exports from $7.5 billion in 2020 to $20 billion by 2030, and the nation’s three players have vowed to invest a combined 40 trillion won (US$35.3 billion) over the next decade.
LG Chem Ltd. and its wholly owned battery subsidiary LG Energy said they will invest a combined 15.1 trillion won (US$13.1 billion) in South Korea by 2030 to expand R&D spending and local manufacturing capacity for batteries and related materials, which is expected to create 8,000 new jobs in related fields.
While the Korean companies are currently taking the lead in lithium-ion battery technology, the ministry said it will work with the private sector to develop the next-generation battery technology for more advanced options.
Among others, the government set a goal of commercializing solid state batteries for EVs by 2027, to get ahead of the global competition for the next game changer.
Compared with lithium-ion batteries composed of liquid electrolytes, solid state batteries made of solid materials can store more energy in the same sized battery and pose a lower risk of fire, but they are still expensive due to early development costs and difficulty of mass production.
According to market researcher IDTechEx, the solid-state battery market is expected to grow to $8 billion by 2031, which would inevitably eat into the conventional lithium-ion battery market.
Korean firms have also been making efforts to improve the battery chemistry and cell structure to make more efficient batteries at competitive costs to accelerate the EV transition.
LG and SK have been making pouch-type lithium-ion batteries, while SDI has been producing prismatic batteries, the same type of products made by China’s CATL and Sweden’s Northvolt.
The government also vowed to support overseas raw material development projects and make diplomatic efforts to secure a stable supply chain for EV batteries to cope with potential supply shortages, while exploring ways to restore essential metals, such as nickel and cobalt, from used batteries.
To better aid technology competition among industry players, market watchers stressed state-level policies in securing raw materials, which account for most of the battery costs, to build a stable supply chain.
“South Korea is heavily relying on major battery materials imported from China, which could pose risks to the local supply chain,” Kim Hyun-soo, an analyst at Hana Financial investment, said.
“Major companies are trying to secure raw materials from abroad, which are necessary for their long-term prospects.”
While Korean battery makers are expanding their global presence with their new factories in Europe and alliances with American automakers, all eyes are now on Stellantis’ upcoming EV Day to get details of its electrification strategy.
There is speculation that Stellantis, the world’s No. 4 carmaker, an entity comprised of Fiat Chrysler Automobiles and PSA Group earlier this year, may join hands with Samsung SDI, the only Korean battery maker that has not yet formed a joint venture with foreign automakers.
LG Energy has launched a joint venture with General Motors to build battery factories in Ohio and Tennessee, in addition to LG Energy’s plant in Michigan, under its plans to invest more than $4.5 billion in the U.S. by 2025.
SK Innovation and Ford are set to launch a joint venture that will build a $5.3 billion battery plant in the U.S. separate from SK’s two factories under construction in Georgia.
Market watchers say the global race for next-generation batteries has just begun in full scale, and only those who succeed in producing quality batteries at competitive prices will be able to capture a bigger share of the rapidly growing market.
“It has become a global game with regional interests and governmental support,” IDTechEx said in a report. “Opportunities will be available with new materials, components, systems, manufacturing methods and know-how.”