Tesla's Advances in Battery Tech Put Korean Battery Manufacturers in a Difficult Position

Korean battery manufacturers enjoy prosperous times these days, being the preferred suppliers for premium EV brands. Nevertheless, Tesla’s battery advancements and its dominant position in the market mean the EV maker can be both their partner and nemesis.
Tesla’s advances in battery tech put Korean battery manufacturers in a difficult position 7 photos
Photo: Tesla
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The Li-Ion battery industry is a crowded and heated space, and Korean manufacturers currently command 26% of this space, according to an analysis by SNE Research. LG Energy Solution is the second biggest battery supplier (after CATL), with 14% of the global Li-Ion battery market. Nevertheless, the Chinese companies are on a roll, with the world leader CATL expanding its market share from 32% in 2021 to 34% in 2022. The company in the third position poses an even bigger threat to LGES. BYD doubled its market share over the last year, overtaking Panasonic and SK On.

Nevertheless, LG Energy Solution is best positioned among South Korean battery manufacturers. It has embraced Tesla’s 4680 form factor and has the most flexible production. On the other hand, SK On insists on producing pouch cells and prismatic batteries, which are expensive to manufacture. SK On has enjoyed a good period following the Chevrolet Bolt battery fire disaster, with more carmakers offering contracts to diversify away from LGES. Nevertheless, the EV market is moving quickly toward cylindrical batterie, and SK On will have to make the switch, which would prove expensive.

Tesla is currently dictating where the battery market is leading. Its 4680 batteries promised a quantum leap in energy density and costs. They are not yet there because mastering the process is not easy. Tesla’s 4680 cells are more than just the form factor. The biggest disruptor should be the dry electrode process, allowing Tesla to significantly increase energy density and slash costs. When this happens, all other players in the battery industry, especially Korean manufacturers, will feel the heat.

Tesla enthusiast and battery industry analyst Dongkyu Kim (@kosarimine) thinks this will happen much earlier than expected. In a long Twitter thread, Kim explains why he thinks the three Korean battery manufacturers, LGES, SK ON, and Samsung SDI, are in a perilous position over the long term. In his opinion, Tesla won the game long ago when it established its own battery form factor, the famous 4680.

All Korean battery makers, except SK ON, have developed 4680 cells, although Samsung is not yet committed to the form factor and is considering different sizes, perhaps 46120 in addition to 4680. They would come on a collision course with Tesla sooner or later. Being a Tesla supplier, LGES is doing OK now, but once Tesla successfully mass-produces the dry-electrode 4680 cells, it will be in trouble.

Tesla knows the price of LG’s 4680 cells and will try to outcompete it, forcing the Korean company to lower margins to unsustainable levels. “LG has to make money first by succeeding in mass production of the 4680 earlier than Tesla to avoid this… which doesn’t seem to be easy though,” writes Kim in his thread. He believes Tesla could produce batteries at half the current costs. This would be a tough moment not only for battery companies but for all other players in the EV industry.

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About the author: Cristian Agatie
Cristian Agatie profile photo

After his childhood dream of becoming a "tractor operator" didn't pan out, Cristian turned to journalism, first in print and later moving to online media. His top interests are electric vehicles and new energy solutions.
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