Will Korea's battery business take off again?

By Kim Da-ye

Korean firms are the world’s leading suppliers of rechargeable batteries, the costliest parts of electric vehicles.

General Motors has a contract with LG Chem, Hyundai Motor Group procures batteries from SK Innovation and BMW’s i3 will carry Samsung SDI’s products. Although Korea does not have its own EV market yet, the slowdown in the international EV market has reverberated through the battery industry. At the same time, Korea’s dominance in the battery industry means that the recovery of the eco-friendly vehicle market will be rewarding.

For now, the obvious casualty of the slowdown is LG Chem. It suffered bad publicity earlier this year when its battery cell manufacturing plant in Holland, Michigan, was audited by the U.S. Department of Energy because of allegations that the plant was left idle.

Back in early 2010, the U.S. government awarded LG Chem more than $150 million for the construction of the plant, which cost $304 million. The project started with a big ambition to create more than 440 jobs and produce battery cells for 60,000 EV by the end of 2013.

Because of more sluggish demands for EVs than expected, some of the plant’s employees, whose salaries are partly paid by the U.S. government, were found to have spent time volunteering at nonprofit organizations, playing games and watching movies, the report said. The report, which came out in February, dealt a blow to LG Chem’s reputation as a leading battery maker.

“It was expected that EVs wouldn’t sell well, but the sales were worse than expected. The EV battery business is expected to report a loss again this year,” said Park Ki-yong, a chemicals analyst at Korea Investment & Securities.

However, Park feels that the EV market won’t die and that carmakers won’t give up on EVs in the long run. LG Chem is strategically on the right path, he thinks.

“LG Chem has an advantageous position in the EV battery market. Late starters will not be able to beat LG Chem in the future. Now is a difficult time for its battery division, but the experiences now will help the firm later,” Park said.