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The Wall Street Publication > Blog > Tech > EV Battery Maker’s Sales Pitch to the West: We’re Not Chinese
Tech

EV Battery Maker’s Sales Pitch to the West: We’re Not Chinese

Editorial Board Published January 26, 2022
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EV Battery Maker’s Sales Pitch to the West: We’re Not Chinese
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SEOUL—South Korea’s LG Energy Solution Ltd. has an audacious plan to dominate the world’s electric-vehicle battery industry: emphasize that it isn’t Chinese.

Contents
A worker at Contemporary Amperex Technology Co., the industry leader.EV Batteries

Currently the world’s No. 2 EV battery maker, LG Energy Solution, which goes public in South Korea’s largest-ever listing on Thursday, has made its dominance in Europe and aggressive U.S. investments a pitch to investors. The Seoul-based company plans to raise nearly $11 billion, fattening a war chest to build new EV battery plants around the world.

The company says its growth plans hinge on being a counterbalance to industry leader Contemporary Amperex Technology Co. 300750 -2.13% , or CATL, which largely caters to its home market of China, the world’s largest EV battery market.

“Our strength is that we have global buyers and global production facilities in the U.S. and Europe, which CATL doesn’t have,” said LG Energy CEO Kwon Young-soo at a recent news conference. The company carries a valuation of about $59 billion.

The EV battery market is at a busy moment, as traditional car makers strike alliances to source a component essential to next-generation technology. CATL controls about a third of the market by units sold, followed by LG Energy’s 20%, according to SNE Research, which tracks EV battery sales. The next biggest players are Japan’s Panasonic Corp. , China’s BYD Co. and two other South Korean firms, SK Innovation Co. and Samsung SDI Co.

CATL didn’t respond to inquiries.

LG Energy, SK Innovation and Samsung SDI have collectively earmarked more than $15 billion in investments to expand their U.S. manufacturing footprint. The trio of South Korean companies accounts for about one-tenth of EV battery capacity in the U.S.

A worker at Contemporary Amperex Technology Co., the industry leader.

Photo: Lin Shanchuan/Xinhua/Zuma Press

By 2025, the three companies, in partnerships with U.S. auto makers, are expected to see their presence increase to 70% of all American capacity, according to the Korea Battery Industry Association, a Seoul-based trade group.

“The ability of the U.S. to meet its EV targets will be largely dependent on the ability of South Korean firms to produce the batteries needed,” said Troy Stangarone, a senior director at the Korea Economic Institute, a Washington-based think tank.

Eleven of the 13 large-scale EV battery plants being built in the U.S. over the next several years involve South Korean companies. LG Energy, in a joint venture with General Motors Co. , plans to build facilities in Ohio, Tennessee and Michigan. SK Innovation is building three battery factories with Ford Motor Co. by 2025, while Stellantis NV is building factories with both LG Energy and Samsung SDI.

“It’s difficult to compete with China in quantity,” said Lee Hang-goo, a senior researcher at the Korea Automotive Technology Institute, a government-affiliated research institute. “But China is having a hard time entering the U.S. and European market because of the ongoing trade war, and South Korean battery makers are taking advantage of that to dominate production in the West.”

LG Energy, which was spun out of LG Chem Ltd. in late 2020, has had setbacks on its path to becoming a publicly traded company. The company originally planned to go public last year, though postponed after its batteries, used in GM’s Chevrolet Bolt electric vehicles, caught fire. LG later agreed to pay GM nearly all of the $2 billion in charges related to the recall of roughly 142,000 cars.

LG Energy says its advantages over CATL, beyond greater market access to the West, include a bigger backlog of orders and having filed 10 times as many patents as its Chinese rival. LG Energy, which generated about $10 billion in revenue in 2020, said it has cumulative future orders worth about $217 billion, with a list of clients that includes Tesla Inc. and Hyundai Motor Co.

Lithium prices are rising as demand for the key ingredient in electric car batteries grows, amid a broader push to move away from oil and gas. But extraction of the metal is time consuming and potentially harmful to the environment, and plans to produce more have prompted protests. Photo: STR/Getty Images, Oliver Bunic/AFP/Getty Images

The 64-year-old Mr. Kwon, a veteran LG executive, said he sees the EV market in a more evolved stage compared with last decade and remains bullish that a fractured global supply chain will disproportionately benefit South Korean companies like his own. He was appointed to lead LG Energy after last year’s costly recall and vowed invest in technology that has a shorter battery life but is safer.

The U.S. and South Korea, longtime allies, have committed to collaborating on supply-chain issues, including semiconductors, EV batteries and biopharma. The Biden administration has given priority to reshoring production of key components, after many businesses struggled to get parts throughout the pandemic.

South Korean companies’ global production capacity almost quadrupled to 217 gigawatt hours in 2020 from 59 gigawatt hours in 2016, according to Seoul government figures.

Last decade, LG Energy, SK Innovation and Samsung SDI sought to break into the Chinese market, though the South Korean companies didn’t receive purchase subsidies that helped fuel the rise of CATL, BYD and other local makers, industry experts say. Those subsidies, which were originally set to expire in 2020, were extended through this year.

“South Korean battery makers’ competitive edge will come from how many customers they can acquire outside of China and whether they can diversify the types of batteries they produce,” said Cho Hyun-ryul, a senior analyst at Samsung Securities.

EV Batteries

Read more articles about batteries, as selected by editors.

— Yang Jie in Tokyo contributed to this article.

Write to Dasl Yoon at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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