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Market jitters grow over Korean battery shares after VW’s decision

By Mar 18, 2021 (Gmt+09:00)

Market jitters grow over Korean battery shares after VW’s decision

Market jitters over South Korea’s battery makers are growing after Volkswagen AG’s announcement on Monday that it will make batteries in-house for its electric cars and switch the battery type in favor of Chinese manufacturers.

Shares of LG Chem Ltd., the parent of Korea’s largest battery maker LG Energy Solution Inc., finished up 0.5% at 861,000 won on Thursday, but dropped 11.3% in the past couple of sessions, weighed by the German carmaker’s decision.

SK Innovation Co., another major local battery maker, closed 0.7% lower at 214,500 won on Thursday, bringing its losses to more than 10% since the announcement.

Stock analysts say that a death cross has occurred for the two shares, indicating the potential for a major sell-off in coming weeks.

The death cross appears on a technical chart when a stock’s short-term moving average, usually the 20-day line, crosses below its long-term moving average, the 60-day line.

“A correction seems to be inevitable for Korean battery shares,” said Hana Financial Investment analyst Song Sun-jae. “The secondary battery sector will likely underperform the broader market for the time being.”

One of the top picks on the local bourse throughout 2020, Korea’s battery shares had outperformed the Kospi market by a big margin as investors snapped up the shares amid a rosy outlook for eco-friendly cars.

LG Energy Solution's pouch-type battery
LG Energy Solution's pouch-type battery


The battery makers, however, were battered by news that Volkswagen, one of the world’s top automakers, at its Power Day event on Monday announced its decision to roll out a new unified prismatic battery cell design from 2023.

Under its EV roadmap, the German carmaker said it plans to build six "gigafactories" in Europe by 2030, with an aim to power up to 80% of its electric cars by 2035 in-house to reduce its dependence on outside suppliers.

To do so, it said it will strengthen its partnership with Northvolt AB, the Swedish battery startup in which Volkswagen took a 20% stake in 2019.

Volkswagen’s moves came as a shock to LG Energy and SK Innovation, which have been manufacturing pouch-type batteries for the German automaker. Samsung SDI Co. is the only Korean company that supplies prismatic batteries to Volkswagen.

Among key beneficiaries of Volkswagen’s decision are China’s Contemporary Amperex Technology Co. Ltd. (CATL) and BYD Co., which make prismatic batteries.

Market jitters grow over Korean battery shares after VW’s decision


Analysts say that it may take time before Volkswagen starts to internally make enough batteries for its electric vehicles.

“The key question you have to ask is how to stably make battery materials at a competitive price rather than what type of battery case you use,” said Mirae Asset Daewoo analyst Park Yeon-ju.

“If the makers of pouch-type batteries can slash production costs at a faster pace, it could weaken Volkswagen’s price competitiveness given the technological capability of its partner Northvolt.”

Koh Jung-woo of NH Investment & Securities said Northvolt apparently has yet to expand its mass production capacity to compete with Korean battery makers.


Major battery players and automakers are competing over the type of batteries to adopt as the global standard.

SK Innovation's battery system
SK Innovation's battery system
In September of 2020, Tesla Chief Executive Elon Musk announced that the company will develop new cells in-house to reduce its reliance on outside suppliers.

The US EV giant said its next-generation 4680 battery cells, currently under development, are a cylindrical type.

“The fight over the battery type standard will get fiercer as it could change the market structure of battery makers,” said Lee Jae-il, an analyst at Eugene Investment & Securities.

Analysts said investors of Korean battery shares may need to adjust their investment portfolio to include battery materials makers that supply to automakers in Europe.

Some of such Korean battery subcontractors include Iljin Materials Co., SKC Ltd., POSCO Chemical Co., EcoPro BM Co. and Soulbrain Holdings Co.

Write to Yun-Sang Ko at

In-Soo Nam edited this article.
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