By Kim Yoo-chul
LG Chem is bullish on its chances to successfully exploit the American attempts to jolt its industry for hybrid and electric cars, which appears to be opening new opportunities for its flourishing batteries business.
The company already counts some of the world’s largest automakers as its clients, and General Motors (GM) could very much become its biggest spending customer, according to company sources.
The Barack Obama administration has promised more than $11 billion in federal aid to help car and battery makers roll out a larger number of electric vehicles more quickly, and GM has been anticipating more demand for its Chevrolet Volt plug-in hybrid cars.
LG Chem has been quickly establishing leadership in the global market for lithium-ion batteries for electric powered cars, and increasing orders from GM and other automakers has the company raising its sales targets over the next few years.
``By 2015, LG Chem will achieve 3 trillion won ($2.7 billion) in sales only in rechargeable batteries from the earlier projection of 2 trillion won,’’ said LG Chem spokesman Song Choong-sup.
``We are set to supply more batteries to GM atop of our existing supply agreement. General Electric (GE) has announced it will be buying 12,000 Volts, manufactured by 2015, which will be part of the company’s fleet of 25,000 electric cars, and GM is expecting increased demands from other major clients. This leads to additional battery orders for us.’’
LG Chem has been supplying lithium-ion batteries to major carmakers like Ford, Volvo, Renault and Hyundai aside of GM.
LG Chem chief executive Kim Bahn-suk recently told The Korea Times that the company has several more deals with major automakers in the pipeline.
To meet the increase in demand, LG Chem has been moving to expand its production muscle.
By 2013, the company’s total battery output capacity will reach 80 million cells, more than a 10-fold increase of the current level and enough to supply 350,000 Volts.
The company will invest 1 trillion won to boost its production output at its plant in Ochang, North Chungcheong Province, to 60 million cells annually.
LG Chem will invest $300 million in its U.S. manufacturing facility by 2013, which will be producing 20 million cells by then.
LG Chem has been producing batteries for the Volt at its Ochang facility since September and also has another facility in Nanjing, China.
LG Chem has been investing in technologies to produce lithium-ion batteries for vehicles that are about 30 percent cheaper than conventional products while providing comparable or better levels of power.
``The company is spending over 40 percent of its total research and development (R&D) budget on batteries, and has also doubled the number of researchers,’’ Song said.
``The goal is to achieve a global share of 20 percent.’’
Currently, the battery business is accounting for some 10 percent of LG’s $15 billion in annual sales as it still heavily depends on petrochemicals. In a recent meeting with reporters, Kim said it will invest up to 2.6 trillion won in 2011 and added its battery division will receive more funding.
``The market for petrochemicals is maintaining a firm stability. Also, the demand for car batteries will further rise after the introduction of EVs from the end of this year,’’ said Ahn Sang-hee, an analyst at Daishin Securities, presenting 500,000 won as its target for LG Chem shares.