Tesla unveiling offers opportunity for Korean EV battery makers; shares down

Tesla Inc.’s announcement that it will adopt a new battery technology to significantly improve an electric vehicle’s range and power should be good news for South Korea’s major battery makers.

But shares of most EV battery makers remained weak as investors took Tesla’s plans to produce batteries in-house and cut costs as an indication that suppliers will be pressured to lower prices.

According to industry experts, Korean EV makers such as LG Chem Ltd. and Samsung SDI Co. are among the few global companies, including Japan’s Panasonic, that can meet Tesla's next-generation battery specifications for its electric cars.

At its much-hyped “Battery Day” event in Palo Alto, California on Sept. 22, Tesla unveiled plans to develop and produce “tabless” battery cells, which it calls the 4680, that enable a 16% range increase for its vehicles. The new cells are bigger than Tesla’s current cells, measuring 46 millimeters by 80 millimeters (thus the name, 4680).

Chief Executive Elon Musk said its new cell manufacturing system should drastically reduce overall costs and allow the company to eventually sell EVs at similar prices to gasoline-powered ones.

He said Tesla will pack the new components more densely into its vehicles by eliminating bulky battery structures typically used in electric vehicles, making the battery itself a dual-use part of a Tesla vehicle frame rather than a supplemental component adding weight.

Analysts said Musk’s announcement that Tesla will begin manufacturing its own batteries is largely aimed at alleviating the expected short supply from other makers, rather than cut ties with suppliers, as the US company plans to aggressively raise its EV production volumes.

SHARES DOWN AS BATTERY MAKERS FACE COMPETITION

In the run-up to the Battery Day, Musk tweeted that the company would continue to use, and even increase the purchase of, batteries supplied by Panasonic, China’s CATL, Korea’s LG Chem and others.

Musk’s comments reinforced the market view that LG Chem will remain a key supplier of rechargeable batteries to Tesla even after the US EV maker starts making its own battery cells. LG Chem was selected as one of the battery suppliers for the Tesla Model 3 in 2019.

Analysts said that while no blockbuster product announcement nor definitive hardware breakthrough emerged from the Battery Day event, Tesla’s shift to in-house battery production will increase competition among EV battery suppliers, forcing them to cut prices.

“News that Tesla will considerably cut battery costs spooked investor sentiment. The plan may hurt the profitability and growth potential of some suppliers,” said Jung Won-seok, a researcher at HI Investment & Securities.

LG Chem finished 1.4% lower at 630,000 won on Wednesday, underperforming the broader Kospi market, which ended flat. Shares of Samsung SDI closed down 2.2% at 436,500 won.

Write to Man-Su Choe and Yun-Sang Ko at bebop@hankyung.com
, kys@hankyung.com