Moon eyes EV battery top spot, promises South Korean “ecosystem of solidarity”

South Korean President Moon Jae-In wants the country to be the number one electric vehicle (EV) battery manufacturing nation in the world by 2030.

After years of South Korean EV battery manufacturers knocking heads in the marketplace and courtroom, Moon last week laid out plans for the country's biggest companies in the sector to team up, invest substantial sums, and work with the government to regain top spot globally.

Investments totaling 40 trillion won ($34.92 billion) by the end of the decade will make this happen, he said.

"In 2011, Korea rose to No. 1 in terms of global market share for small-sized batteries, overtaking Japan. We are competing fiercely with China to take the lead in mid- to large-sized batteries as well. Our goal is obvious: to become the undisputed No. 1 country for batteries by 2030," Moon said.

"We will build an industrial ecosystem of solidarity and cooperation," he said.

Grand alliance

To this end, Moon is pooling the efforts of leading domestic battery manufacturers LG Energy Solution, Samsung SDI, and SK Innovation alongside their potential customers and suppliers, as well as government agencies, in a grand "K-Battery" alliance.

SK Innovation is looking into spinning off its battery business, CEO Jun Kim told investors earlier this month, as it looks to ramp up production capacity from 40 GWh currently to more than 500 GWh in 2030.

The global battery market has doubled in size over the last five years, said Moon. The market is projected to surpass the memory chip market in 2025 and grow eight-fold from its present size, topping $350 billion in annual sales, he said. "This constitutes a tremendous opportunity and a challenge at the same time," he added.

The challenge is coming in particular from Chinese rivals, according to IHS Markit data, including CATL and BYD, who are battling South Korean companies for the hand of tech giant Apple in a self-driving car marriage, according to local media.

IHS Markit expects production volumes of EVs in the country to reach over 5.2 million units in 2025, compared with less than 1 million units in 2019.

That challenge will be tackled with unprecedented investment incentives, Moon said.

To encourage the 40 trillion won investment, South Korea will designate batteries as a national strategic technology, alongside semiconductors and vaccines, and strengthen tax incentives by allowing up to 50% deductions for research and development, 10 percentage points higher than had been the case, and up to 20% for facility investments.

The South Korean government, companies, and financial institutions will create a more than 80 billion won ($69 million) fund in a bid to support technology development by battery-related materials, parts and equipment businesses, Moon said.

In addition, a 1.5 trillion won ($1.31 billion) program to provide special financial support for K-batteries will also be activated.

Moon is aiming high; if the US is seeking hydrogen earthshots, then South Korean chaebols should take flight in the battery sector. They should also be aiming for commercial flying cars by 2025, he told attendees of the presentation.

Also, South Korean lithium-sulfur batteries will be commercialized by 2025, all-solid-state batteries by 2027 and lithium-metal batteries by 2028, he said.

Looking to the future

Moon evangelized about the prospects for electrification and batteries when announcing the grand alliance.

"Batteries are dramatically transforming our daily lives through electric vehicles, drones, robots, machine tools, cordless vacuum cleaners, laptops, mobile phones and smart watches. The era when even ships, airplanes and trains are powered by batteries is coming," he said.

"Batteries are making a meteoric rise to the center of future industries. If we think of semiconductors as the brain that processes information, batteries can be likened to the heart that drives devices," he added.

But the competition will be fierce, he noted, recognizing that the US and European countries are starting full-fledged efforts to foster their own battery makers, going beyond attracting investments from South Korean companies such as LG Energy Solution.

Volkswagen, the world's second-largest car manufacturer, announced it will gradually move away from EV batteries supplied by South Korean companies and instead make its own batteries in-house.

Tesla, the world's biggest EV car company, also announced plans to develop new cells in-house and reduce its reliance on outside suppliers.

Meantime, US President Joe Biden wants a domestic lithium-ion battery industry and is also worried about supply chain fragility when it comes to his promised cleantech revolution.

The rewards will be worth Moon's efforts though, even if one considers just the domestic South Korean market, according to IHS Markit Principal Research Analyst Vince Heo. The government envisages South Korea's battery market revenue reaching $150 billion by 2030 with a 40% market share, compared with $20 billion in 2020, he said.

Moon's announcement emphasizes the South Korean government's plans to secure a global supply chain in the battery business and foster a partnership among domestic battery companies, Heo said.

Posted 12 July 2021 by Keiron Greenhalgh, Senior Editor