The Establishment Of The European Battery Alliance Will Aggravate The Dilemma Of Japanese And Korean Battery Companies

- Oct 21, 2019-

As Volkswagen Group and other European automakers plan to be self-sufficient and produce batteries for electric vehicles to reduce their reliance on Asian battery manufacturers, battery manufacturers such as LG Chem, Samsung SDI and SKInnovation are facing increasingly disadvantageous in Europe. Business Environment.

European companies' involvement in the electric vehicle 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 said that all partners will increase investment as more research activities are planned, and Volkswagen added that the battery alliance may seek financial support from the German Ministry of Economic Affairs.

Volkswagen Group has become one of the world's largest manufacturers of electric vehicles. This German company is also a major customer of Korean 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 batteries are the key components of electric vehicles, accounting for about 40% of production costs.

With the introduction of electric vehicles by European automakers, the demand for electric vehicle batteries in Europe is also rising. To solve the battery supply problem, the German government is coordinating efforts to establish a cross-company battery alliance. According to Reuters reported on November 9, the German government has allocated 1 billion euros (1.2 billion US dollars) for the alliance to produce batteries and establish the infrastructure to study the next generation of solid-state batteries. 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.

The German Ministry of Economics said earlier this month that more than 30 companies have applied for the program to support battery production. The German government's move to formulate industrial policies is also a breakthrough, and the government generally did not interfere with business decisions. In addition, the European government plans to form a battery alliance to deal with the challenges brought by companies such as China, Japan and South Korea, and the German government's move is part of the plan.

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 battery manufacturers.”