LG Energy solution explores Chinese partnerships for low-cost EV batteries

Low-cost EV batteries: LG Energy Solution is a key player in South Korea's battery industry. It is in discussions with several Chinese suppliers to manufacture affordable batteries for electric vehicles (EVs) in the European market. 

The move comes amidst the escalating competition following the European Union's imposition of additional tariffs on EVs imported from China. This has prompted LGES to seek partnerships to reduce its costs and enhance competitiveness in Europe. Wonjoon Suh,(head of LGES' advanced automotive battery division), has declined to disclose about any specific companies involved in the partnerships. He said, " We are in talks with Chinese firms to jointly develop lithium iron phosphate (LFP) cathodes and produce them for the European market," 

“ LGES aims to establish joint ventures or secure long-term supply agreements as part of its strategy to match the pricing of its Chinese counterparts within the next three years,” Suh said. Cathodes, crucial components of EV batteries significantly influence the costs of production and account for approximately a third of total battery cell expenses.

The initiative highlights a wider trend where non-Chinese battery manufacturers which include LGES and its peers, face peak pressure from auto manufacturers to adopt cost-effective strategies amid low global EV demand.

Earlier this month, Renault of France had announced its plans to integrate LFP battery technology into its EV production plans and partnership with both LGES and China's CATL to strengthen its supply chain in Europe. This decision followed the European Commission's tariff imposition, which prompted all the Chinese EV manufacturers and battery firms to bring up investments within the region.

LGES is currently evaluating potential production sites for LFP cathodes, including Morocco, Finland, and Indonesia aiming specifically at meeting Europe's ongoing demand for affordable EV models. Suh has highlighted Europe's robust appetite for budget-friendly EVs, which constitute about half of the region's total EV sales, a higher proportion than in the United States.

According to market tracker SNE Research, South Korean battery firms collectively recorded a 50.5 per cent share of Europe's EV battery market in the first five months of this year, with LGES alone holding 31.2 per cent. In contrast, Chinese competitors led by CATL captured a 47.1 per cent market share.

Despite current challenges posed by a sluggish EV market, intensified by pandemic-related disruptions, Suh has expressed optimism about a recovery within 18 months in Europe and two to three years in the United States. 

LGES is known for its joint ventures with major auto manufacturers such as General Motors, Hyundai Motor, Stellantis, and Honda Motor, and remains poised to go through evolving market dynamics while reinforcing its position in the global EV battery supply chain.

(With Reuters Input)