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Volkswagen's battery push may hurt S. Korean suppliers The U.S. EV market becomes more important to three major battery makers

Translated by Ryu Ho-joung 공개 2021-03-19 13:57:38

이 기사는 2021년 03월 19일 10:34 더벨 유료페이지에 표출된 기사입니다.

Volkswagen, Europe’s largest automotive group, surprised the South Korean battery industry by announcing a shift in strategy to take control of battery production, making the U.S. electric vehicle (EV) market more important to the country’s battery suppliers.

The German automaker said in a statement on Monday that it plans to build a total of six battery cell factories in Europe by 2030 to secure a combined capacity of 240 gigawatt hours (GWh) each year.

The company will also use the so-called “cell-to-pack” technology – in which battery cells can be integrated directly into the battery pack without the intermediate step of modules – and is ultimately aiming to adopt “cell-to-chassis” technology, which will allow battery cells to be integrated with an electric car's chassis, meaning that not only the modules but also the packs would be shed.

These technologies have been first introduced by CATL, China’s largest automotive battery maker. In contrast, South Korean battery suppliers produce battery modules and packs.

“Volkswagen’s vertical integration plans mean a partnership with CATL,” an industry insider said. “This could weaken the position of South Korean battery makers in the future.”

Deloitte forecast that China will hold 49% of the global EV market by 2030, Europe will account for 27%, and the U.S. will take about 14% share. The Chinese EV market is dominated by local players. With European carmakers gradually shifting strategies to build their own battery production lines, the U.S. EV market has become more important for South Korean battery makers.

Chinese battery manufacturers have turned to the European market because of the trade war between the U.S. and China and aggressive measures against Chinese companies by the former Trump administration, industry watchers said.

CATL, which went public on the Shenzhen Stock Exchange in 2018, is currently building its first battery cell plant outside China in the German state of Thuringia. Meanwhile, Volkswagen last year acquired some 30% of Guoxuan High-tech, the third largest battery maker in China, becoming the largest shareholder in the company.

Volkswagen, whose largest battery supplier is CATL, also buys batteries from three major South Korean battery makers – LG Energy Solution, Samsung SDI and SK Innovation, according to sources.

“LG Energy Solution may suffer less from losing European customers because its client base is well diversified geographically,” a source said. “In contrast, a large portion of Samsung SDI’s revenues comes from the European market, and SK Innovation’s battery business is still in the early stages of growth.”

Compete for U.S. market share

Unlike in Europe, South Korean players are gaining the upper hand in the U.S. market. Tesla has worked with its longstanding partner, Japan’s Panasonic, to produce batteries. But traditional auto groups, such as General Motors (GM) and Ford, have chosen South Korean battery makers as their partners.

LG Energy Solution, which was spun off from LG Chem in December last year, has a battery factory in Michigan, which was built in 2012. It is also building a plant with an annual production capacity of 30GWh in Rosetown, Ohio, in partnership with GM. SK Innovation is also trying to expand its market share in the U.S.

“Partnership between automakers and battery suppliers is not simply a matter between companies but is closely related with government policies and interests. That is why Volkswagen’s strategy shift can be seen as an alliance between Germany and China,” said an industry insider.

“In this context, it is more closely watched whether President Biden will overturn the U.S. ITC (International Trade Commission)’s decision against SK Innovation in its legal battle with LG Energy Solution over EV batteries.” (Reporting by Sang-hee Park)
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