Will Samsung, LG build battery plants in Spain?

By Kim Bo-eun

Samsung SDI and LG Energy Solution (LGES) could possibly be considering building production facilities in Spain after Volkswagen said it will manufacture battery cells in the European country.

However, officials from both Korean companies said they had no plans to build battery manufacturing plants there.

Despite the denials, the feasibility for doing so is gathering momentum after the German carmaker's CEO Herbert Diess earlier confirmed plans to assemble battery cells in Spain as part of converting its Martorell factory there into a complete electric vehicle (EV) plant. Volkswagen is holding a "Power Day," March 15, where it is expected to unveil more details about securing EV batteries.

Battery makers here, including SK Innovation (SKI), are exploring the best ways to penetrate the European market following EU initiatives to assist the EV industry. They are currently eyeing sites to base production for their European clients.

Volkswagen owns a Spanish carmaker affiliate, SEAT, which is also a technology partner of Samsung. Spain's first factory for EV batteries is set to be built in affiliation with SEAT.

The carmaker aims to increase the portion of its EVs to 50 percent of production in the U.S. and China by 2030 and 70 percent in Europe by the same year. In order to secure EV batteries, it has signed long-term contracts with LGES, Samsung SDI and China's CATL. The contracts, worth $48 billion, are for the supply of 300 gigawatt-hours worth of batteries. But Volkswagen may need to scale up the volume to meet its targets.

As a means to hedge risks associated with supply, Volkswagen is also seeking to become involved in the production of batteries through partnerships with the Stockholm-based battery maker Northvolt.

It is unclear to date what Volkswagen's Spanish production facility of EV batteries will look like. But expectations in the industry are that it will likely be set up in partnership with an existing battery manufacturer.

An artist's rendering of Samsung SDI's Hungary plant / Courtesy of Samsung SDI

Samsung SDI said recently it was looking into new production sites for the medium to long term. The battery maker's core production base in Europe is in Hungary and it unveiled plans recently to invest 942 billion won to expand the facilities there.

Given the scale of investment in the Hungarian plant, an immediate partnership to set up another production facility does not appear likely. Samsung SDI is reviewing sites in China, Malaysia and Korea for a plant manufacturing cylindrical batteries.

A Samsung SDI official said “We do not have plans to build a plant in Spain because it is more urgent to construct a factory in a different region.” But he didn't elaborate, further.

Sources said a Spanish battery plant for LGES is feasible, as it supplies Volkswagen as well as Tesla. There have been reports that LG could set up a factory in Spain to supply Tesla's German plant. LGES currently operates a factory in Poland.

However, an LGES official said, "We have no reason to set up a production base in Spain."