South Korean automotive battery giants are moving into the U.S. market, with SK Innovation teaming up with Ford and LG Chemical with GM to promote the construction of an automotive battery plant. SK plans to invest about 300 billion yen in the plant to produce 22 gigawatt-hours of automotive batteries, enough to power 220,000 EVs a year, and in a joint venture with Ford, the two companies will invest 600 billion yen to build a giant 60-gigawatt plant.
SK’s annual production capacity as of 2019 is only 5 gigabytes at its Korean plant. The capacity is expected to increase to 30 gigawatts in 2020 with the launch of plants in China and Hungary, to 85 gigawatts in 2023 with the addition of the US plant, and to exceed 185 gigawatts in 2025 with the addition of the joint venture with Ford. SK, a late entrant to the market, ranks sixth with a 5% share of the global market in 2020.
With its bold investment decisions, SK is hurrying to rise to the top of the market, and with orders worth 80 trillion won (about 8 trillion yen), it is pushing ahead with plans to increase production in three locations in the United States, China, and Europe.
LG Chem, the second largest company, is also expanding its investment at a rapid pace, and has secured orders worth 15 trillion yen from a wide range of customers, including GM, Hyundai Motor, Geely Automobile of China, and Tesla of the United States. In the U.S., LG Chemical has partnered with GM to build joint venture battery plants in Ohio and Tennessee with an annual production capacity of 30 gigawatts each.
The creation of these “U.S.-ROK alliances” was also influenced by the political decision to leave China. CATL, which has announced a 1.5 trillion yen investment plan, has production bases in China, including Guangdong, Fujian, and Sichuan provinces.
With the Biden administration’s strong desire to eliminate China from the supply chain and promote home production, U.S. automakers have had to look for partners outside of China. The South Korean government has positioned automotive batteries as the “second semiconductor” and intends to develop them into the next mainstay product after semiconductors, which are the backbone of the country’s economy, and aims to accumulate the battery industry by taking advantage of the fact that it has three major companies in the world, LG, SK, and the fourth largest, Samsung SDI.
Source: The Nikkei
PSR Analysis: Not only the three Korean battery makers, LG, SK, and Samsung, but battery makers around the world are aiming to take the lead in the EV market by increasing their production capacity to compete with CATL and other Chinese companies. Against the backdrop of friction between the U.S. and China, by surrounding themselves with demand in the North American market, where Chinese companies are unable to expand, orders from U.S. and European automakers will probably increase in the short term. However, South Korea is an ally of the U.S. in terms of security, while economically it has strong ties with China. It is searching for just the right balance point but shifts in the political equilibrium can also be a risk.
Most automotive battery manufacturers are currently taking action to increase production, but there is a risk of oversupply after the current supply shortage is resolved. No one is talking about this at the moment because of the rapid increase in demand, but I believe it is a point that should be considered. PSR
