How does the establishment of EBU affect Korean battery manufacturers

As Volkswagen Group and other European automakers plan to be self-sufficient, they will produce lithium-ion batteries for electric vehicles to reduce their reliance on Asian lithium ion battery manufacturers. These big battery companies such as LG Chem, Samsung SDI and SKInnovation are facing an increasingly unfavourable business environment in Europe.

European companies’ involvement in the electric vehicle lithium polymer battery market is seen as a threat to Korean battery manufacturers who are trying to nurture the electric vehicle battery business as one of their new growth engines. According to industry experts, the global electric vehicle battery market has been dominated by companies in South Korea, China and Japan, and the participation of European companies may lead to fierce competition.

On March 21, local time, Volkswagen announced the establishment of the European Battery Alliance (EBU) in cooperation with Swedish battery manufacturer Northvolt, which aims to fund research, development and industrial applications of battery technology. Volkswagen said in a statement, “The European Battery Alliance’s joint research activities will cover the entire value chain from raw materials, battery technology to battery recycling. The primary goal is to accumulate a wider range of battery production technologies.”

Volkswagen Group has become one of the world’s largest manufacturers of electric vehicles. This German company is also a major customer of Korean lithium ion battery manufacturers. In November last year, SKInnovation signed a supply contract with Volkswagen Group. Insiders pointed out that Volkswagen Group’s latest measures show that it is in crisis because it can not independently produce electric vehicle batteries, because lithium polymer batteries are the key components of electric vehicles, accounting for about 40% of production costs. 

European governments are also actively supporting the production and growth of electric vehicles in the country. In November last year, the German government announced that it would invest 1 billion euros in local battery production, and France also plans to invest 750 million euros. These moves are clearly unfavorable for Korean battery manufacturers who have previously secured large-scale battery production contracts in Europe and expanded their plant and equipment investments in Europe.

An executive of a South Korean battery manufacturer who declined to be named said, “The latest European initiatives may pose a threat to Korean companies, but the goal of Europe to achieve independent production of electric vehicle batteries remains to be seen, because battery production is a “It’s hard to do in a short time.” Another executive said, “European initiatives may help expand the entire electric vehicle market, which will create another opportunity for Korean lithium battery manufacturers.”