According to the coverage of South Korean media Pulse, the aggressive overseas expansion from the three leading battery suppliers of the country, LG Energy Solution, SK On, and Samsung SDI, has triggered concerns for the local industry on potential industry inanition as no expansion plans have been revealed for the domestic market.
As seen from recent production expansions, the Michigan expansion of LG Energy Solution has obtained US$56.6 million of state subsidization and 20 years of tax cuts (worth US$132.6 million), while the European Commission also approved the Hungarian government on providing a subsidy of EU€209 million to SK On for the supplier’s third local lithium-ion battery plant for EVs. Samsung SDI is also expected to receive KRW145 billion of subsidization for its expansion in Hungary.
The three leading battery suppliers are also establishing factories and production bases, or forming joint ventures, with overseas suppliers, in their attempt of overseas expansion.
Foreign governments, especially European and American countries, have been incentivizing South Korean battery suppliers to establish factories overseas through favorable conditions such as national subsidization or tax cuts, and these suppliers must produce locally while forming overseas factories in order to work with major automotive manufacturers and accelerate global expansion.
Industry insiders explained that global automotive manufacturers require batteries to be transported onshore rather than offshore, which is why it is difficult in establishing battery plants in South Korea, where the latest partnership is centralized on joint ventures. Also taking cost and geopolitics into consideration, South Korean battery suppliers are now targeting the global market.
Kim Pil-soo, Professor of Automotive Engineering at Daelim University, pointed out that due to the America First principle, EV batteries now occupy approximately 40% of total vehicle cost, which is why localization is becoming increasingly important.
The issue lies on South Korean suppliers’ lack of plans on expanding domestic battery production whilst aggressively enlarging overseas production facilities. For instance, SK On aims to retain a total capacity of 220GWh by 2025, though the Seosan production base merely accounts for 5GWh, while LG Energy Solution strives to arrive at 200GWh in capacity for North America by 2025, with domestic contribution possibly sitting at 10% only.
In addition, even Hyundai, a major automotive manufacturer, has decided to establish battery plants in Indonesia. Hence, experts believe that the South Korean government has to show willingness in resolve problems such as cost of land, as well as the conflict between salary and labor, in order to prevent industrial inanition for the country.
(Cover photo source: pixabay)