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| LG Chem's battery manufacturing plant in Poland / Courtesy of LG Chem |
Japan's Panasonic is 'too dependent' on Tesla, while Samsung focusing on profitability over market expansion
By Baek Byung-yeul
The global electric vehicle (EV) battery market will likely be restructured into an oligopoly of two big players ― Korea's LG Chem and CATL of China. And LG, which remains in second place after Panasonic of Japan, is expected to quickly claim the top market share position as the battery maker has succeeded in broadening its customer base, according to an industry source, Wednesday.
The source said LG Chem will likely lead the global EV battery market, edging out Panasonic, as the company has reached "economies of scale," helping the firm lower manufacturing costs.
"Currently, there are four key players ― Panasonic, LG Chem, CATL and Samsung SDI ― in the global EV battery market. Among them, LG will likely secure market leadership as the company succeeded in reaching economies of scale that allows the firm to mass produce batteries at reduced costs," the official said.
"For Panasonic, which is known to have the largest market share, there is a concern that the company is too dependent on Tesla, while LG Chem is also supplying its batteries to the U.S. EV maker's Gigafactory 3 plant in Shanghai," he added.
Industry analysts have sustained their positive outlook on the EV battery business with more carmakers trying to release energy-efficient EVs. According to industry tracker SNE Research, the global EV battery market will reach an estimated value of $167 billion in 2025, slightly larger than the memory chip business.
Industry trackers indicated LG Chem has shown market dominance. Adamas Intelligence, a Canada-based market researcher, noted that the company had already secured the largest market share of 35 percent in February. SNE Research estimated LG's market share in the global EV battery market from January to February was at 26 percent, about 4 percentage points behind Panasonic's 29.8 percent.
Given this, securing a stable supply chain for materials and equipment needed to produce battery cells, and the diversification of a customer base have been regarded as key prerequisites to make enough money in the sector.
LG Chem said it has succeeded in both preconditions and forecast its battery business will be able to claim the top spot in terms of market share.
"We have been betting big on the European EV market. Though carmakers there are struggling with the COVID-19 pandemic, they will work on improving EV production numbers to comply with stricter CO2 emission standards once the situation is normalized," an LG Chem official said.
As a measure to protect the environment, automakers have to reduce their CO2 emissions from 130 grams per kilometer to 95 grams starting this year. This strict policy has forced manufactures selling their cars in Europe to produce more EVs so that they can meet the average CO2 emission target.
"In Europe, LG Chem has been supplying our EV batteries to almost every carmaker. With a wide-ranging customer base there, we will be able to increase sales and market share," the spokesman added.
LG Chem's market share was around 10 percent as of January 2019 but the company could improve this to around 20 percent by the end of the year after supplying battery cells to Ford, Hyundai Motor, Volkswagen and Tesla.
With LG Chem accounting for the largest share, the combined share of Korean battery makers including Samsung SDI and SK Innovation surpassed the 40 percent mark for the first time in February. SNE Research data showed Samsung SDI ranked fifth with 6.5 percent and SK Innovation sixth with 5.9 percent.
For Samsung SDI, the high-ranking industry source said the company is seemingly focused on improving its profitability rather than betting on expanding the number of clients on its roster.
"SK Innovation, which is a latecomer to the business, is lowering its battery cell price in an effort to increase its customer base. In this situation, Samsung SDI is focusing on maintaining internal stability," he said.
Park Kang-ho, an analyst at Daishin Securities, presumed Samsung SDI will be able to turn its EV battery business profitable in the second half of 2020.
"Samsung SDI's EV battery business will start generating a profit in the fourth quarter. As the portion of EVs is increasing especially in Europe due to the stricter CO2 emission regulation, sales in the EV battery business in 2020 will increase by 67 percent year-on-year," the analyst said.
