Battery manufacturers trying to find cheap Chinese parts, “What is the survival strategy for the Korean battery manufacturing industry?”

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Domestic battery manufacturers appear to be reducing costs due to the slowdown in global electric vehicle demand that has continued since last year. In particular, as attempts to utilize inexpensive Chinese materials, parts, and equipment (materials and equipment) are expected to increase, many are concerned about a blow to domestic battery equipment and equipment companies. Accordingly, it is expected that attempts by domestic battery manufacturing companies to target overseas markets, which have continued since last year, will become more active.

A large domestic battery manufacturer that claims to “secure cost competitiveness”

According to the industry on the 14th, the hot topic this year for domestic battery manufacturers is securing cost competitiveness. Kim Dong-myung, the new CEO of LG Energy Solutions, emphasized “securing structural cost competitiveness for a winning strategy that will lead to qualitative growth” in his recent inauguration speech. Samsung SDI President Choi Yoon-ho also emphasized in his New Year’s address this year, “We will secure the highest level of cost competitiveness in the world to preemptively respond to changes in the market.”

The reason the domestic battery industry emphasizes cost competitiveness is because there is a need to improve profitability due to the recent slowdown in global electric vehicle demand. Currently, battery companies are experiencing stagnant demand as electric vehicle inventory piles up due to the global economic downturn in the second half of last year. As the rapid growth as before was put on hold, pressure on performance increased in the short term, and it appears that the company is trying to resolve this by cutting costs.

The problem is that some battery companies are considering using Chinese components for this purpose. An official from a domestic battery partner company said, “Recently, we have been receiving requests from our customers to significantly lower the unit price of delivery. In the case of a company well-known as a domestic battery manufacturer, parts and consumables used in battery production such as aluminum pouches and battery cans are supplied. “There was also a request to lower the unit price to the level of Chinese companies,” he said.

In terms of battery materials, Chinese companies such as BTR, Zichen Technology, Shanshan, Capchem, and Sangha Energy have already entered the domestic battery supply chain. In the equipment field, where only a few companies have entered, it is known that Chinese equipment companies such as Sundo Intelligence and Yinghe Keji are seeking to join the domestic market. An official from a domestic battery manufacturer said, “The advantage of Chinese materials and parts is their price competitiveness,” and “For some parts, the unit price of the equipment is more than 20% cheaper than domestic products.”

However, Chinese parts have as many disadvantages as their advantages. The industry consensus is that although it is superior to domestic products in terms of price, it lags behind in terms of delivery and technology. In addition, the fact that it is not easy to respond to the US Inflation Reduction Act (IRA) is also a burden for domestic battery manufacturers. According to detailed regulations for foreign companies of concern (FEOC) recently announced by the U.S. administration, starting this year, electric vehicles using Chinese battery parts will be excluded from subsidies.

K-Battery targets the United States, which will emerge as the world’s largest electric vehicle market subcontractor industry

As domestic battery manufacturers reduce costs, attempts by domestic battery manufacturers to target overseas markets are expected to become more active. The domestic battery manufacturing industry, which early on succeeded in differentiating itself by localizing related technologies, has directly secured overseas resources or cooperated with major global automakers. In particular, as the United States emerged as the world’s largest electric vehicle market after the introduction of IRA, the entry of related equipment and equipment companies, following domestic battery manufacturers, increased significantly.

A representative example is that in July last year, SKC’s subsidiary SK Nexilis established a secondary battery copper foil joint venture (JV) in North America with Toyota Trade, a Toyota Group trading company. Toyota Trading is in charge of supplying all raw materials for TBMNC (Toyota Battery Manufacturing North Carolina), which is being built by Toyota Motor Company in North Carolina. The two companies plan to effectively respond to the increasing demand for copper foil in North America by starting mass production as early as 7.

Lotte Energy Materials, another domestic copper foil company, is also considering site selection and construction for a battery foil factory in North America, and Solus Advanced Materials is building a copper foil factory in Quebec, Canada. In addition, domestic separator companies such as SK IE Technology, WCP, and LG Chem also began establishing production systems by considering building new factories in North America or establishing joint ventures with U.S. battery manufacturers last year.

The reason why domestic battery manufacturers are particularly active in entering North America is because of demand. According to market research firm SNE Research, the U.S. electric vehicle market is expected to reach 2030 million units by 1,000. This is approximately 20% of the global market, making it the world’s largest market, surpassing China. In particular, demand for electric vehicle batteries in the United States is expected to grow rapidly at an average annual rate of 2021% from 64GWh in 2025 to 453GWh in 63, while supply shortages for some battery materials, such as copper foil, are severe enough to fall short of 1,000 tons per year.