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EV batteries

Korea unveils $35 billion battery investment plan to catch up to China

The announcement comes as the country’s three major players face an uphill battle against the likes of China’s CATL

By Jul 08, 2021 (Gmt+09:00)

President Moo Jae-in and CEOs of Korea's battery makers agree to enhanced investment
President Moo Jae-in and CEOs of Korea's battery makers agree to enhanced investment

South Korea’s major battery makers have pledged to invest 40.6 trillion won ($35.4 billion) in the electric vehicle battery industry over the next decade as part of a government-led initiative to position the country as the global leader.

The investment to be led by three key players – LG Energy Solution Ltd., Samsung SDI Co. and SK Innovation Co. – will help them better compete against dominant players such as China’s Contemporary Amperex Technology Co. Ltd., commonly known as CATL.

“Batteries are the backbone of the Korean industries that hold the future of the country,” South Korean President Moon Jae-in said on Thursday, during a visit to an LG Energy plant, where the government unveiled a so-called “K-battery development strategy.”

“We should sharpen our competitiveness to overtake our bigger rivals and further widen the gap with our followers.”

Under the government-led initiative, the three battery majors will spend a combined 20.1 trillion won on research and development and invest 20.5 trillion won in facilities until 2030.

In response, the government will support the companies developing next-generation battery technology, including solid-state batteries, and provide them with expanded incentives and tax breaks, according to a trade ministry statement.

Specifically, the government said it will offer a maximum tax credit of 20% for investments into equipment, and tax credits of up to 50% for investments into R&D.

SK Innovation
SK Innovation

The government, financial institutions and battery makers will jointly set up a 80 billion won fund to help small- and medium-sized firms strengthen their ability to provide battery-making materials and components.

The ministry said it will foster some 1,100 battery-related experts annually, up from the current 50 professionals a year.

UPHILL BATTLE VS CHINA

The long-term project comes as Korean battery makers are increasingly facing an uphill battle against Chinese competitors.

As of last year, Korea led the global battery market with a 44.1% share, followed by China (33.2%) and Japan (17.4%).

But Korean players are steadily losing ground to their Chinese counterparts, which are strengthening their foothold under aggressive government subsidies and administrative support.

In the first five months of this year, China’s CATL accounted for 31.2% of the global battery market, while Korea’s LG Energy saw its market share fall to 23.1%, according to market tracker SNE Research. Samsung SDI and SK Innovation ranked fifth and sixth, respectively, with their market share of around 5% each.

In a bid to solidify its market leadership, CATL is said to be considering a battery plant with an annual capacity of 80 GWh in Shanghai, larger than the company’s current overall production capacity of 69.1 GWh.

LG Energy Solution
LG Energy Solution

Industry watchers said the Shanghai factory will likely supply batteries to Tesla Inc., which has an auto manufacturing plant in the Chinese city.

Korean battery makers will also compete with automakers, which plan to make batteries for their electric cars themselves.

In March, South Korean EV battery makers were caught off guard when Volkswagen AG announced it would gradually switch the type of batteries used in its EVs away from those made by Korean suppliers and make its batteries in-house.

In September 2020, Tesla Chief Executive Elon Musk also said the company will develop new cells in-house to reduce its reliance on outside suppliers.

KOREA’S CAPACITY EXPANSION

To keep their Chinese rivals in check, the three Korean battery makers said they will raise their combined production capacity to 430 GWh a year by 2023 from 180 GWh in 2020.

SK Innovation said in May it signed an initial agreement with Ford Motor Co. to launch a 6 trillion won JV, named BlueOvalSK, to manufacture batteries in the US.

SK Innovation is already constructing two battery plants worth $2.6 billion in the US state of Georgia.

Samsung SDI
Samsung SDI

LG Energy Solution has formed an EV battery JV with General Motors Co. Their JV, Ultium Cells LLC, is building a $2.3 billion EV battery cell manufacturing facility in Lordstown, Ohio.

In April, LG and GM announced that they will spend 2.7 trillion won to build their second US EV battery plant in Tennessee, which should double their EV battery output in the country.

More recently, Samsung SDI said in June that it is considering launching a battery production joint venture in the US with a global automaker to gain ground in one of the world's biggest auto markets.

Write to Ji-Hoon Lee, Do-Won Lee and Jae-Kwang Ahn at lizi@hankyung.com

In-Soo Nam edited this article.
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