Batteries: Korean battery makers extend their dominance in the western auto industry while securing battery raw materials


On 5 December, the CEO of General Motors (GM) announced a 30GWh joint venture with South Korea’s battery maker LG Chem to build battery cells through a US$2.3Bn investment in Ohio, USA. In the same week, SK Innovation signed a six-year 30kt cobalt deal with miner Glencore to further secure its procurement of key battery materials.

The new joint venture between GM and LG Chem is a step further by automakers to secure battery cells while increasingly controlling battery technology and manufacturing techniques. In this regard, the press release stated that the new partnership will also include joint product development of cells and chemistry. While the new factory will initially focus on supplying batteries for GM vehicles, the North American carmaker did not rule out eventually supplying batteries to other OEMs.

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Although GM and LG Chem have been working together for almost a decade, a battery joint venture in the USA represents GM’s conviction in North America’s future electric vehicle demand and its direction as a carmaker.

So far, LG Chem has signed eleven battery supply contracts with global automakers, five of them with western carmakers like GM, Renault, Volkswagen, BMW, and Volvo. To fulfil those contracts, LG Chem is currently producing cells through five manufacturing plants with another three expected to come on-line during the next decade. This would bring LG Chem capacity to 170GWh by 2025, possibly becoming the world’s largest battery maker. More upstream, LG Chem will source 30% of its high-nickel cathode production internally. For that, it has signed two lithium off-take agreement deals, another two for cobalt, and one for nickel sulphate with several mining companies.

In parallel, SK Innovation, a Korean competitor currently litigating with LG Chem, has been ramping up its manufacturing capacity through six new battery plants located in Hungary, China, and the USA. While SK Innovation had less than 10GWh of installed manufacturing capacity in 2019, it has signed multiple supply deals with large carmakers like Hyundai, Daimler and Volkswagen. Through these new cell contracts, SK Innovation expects to increase its manufacturing capacity beyond 100GWh, a ten-fold increase. To fulfil those ambitions, the Korean company recently signed a 30kt cobalt supply deal over six years with Glencore. Similarly, in November 2018, SK Innovation signed a 12kt cobalt deal and a 60kt nickel sulphate deal with Australian mines.

As of today, battery pack costs constitute around 30% or more of the total cost of a fully electric vehicle – a significant part of the powertrain value not yet controlled or profited by automakers. For that reason, automakers are looking to create joint ventures with battery cell makers; the recent LG-GM agreement brings the total number of joint ventures to 14. In these joint ventures, a mix of capital investments and technology transfers over several years has allowed few carmakers to even consider an in-house battery manufacturing division such as Tesla’s. After a 10-year relationship with Panasonic, Tesla has now acquired Maxwell and Hibar Systems and is sourcing electromagnetic filters from Daebo. Over the next decade, to profit from that 30% battery pack value, we believe it likely that companies such as GM, Volkswagen and Toyota could start to produce their own new-generation battery technology in-house after a decade of collaboration with the top industry producers.

More information on the market trends of lithium-ion batteries can be found in Roskill’s 3rd Edition of the Lithium-ion Batteries: Outlook to 2028 report published in April 2019.

Roskill’s Greenfield Battery Raw Material Projects for the 2020s report, which gives more detailed analysis of trends for the major raw materials of lithium-ion batteries (cobalt, graphite, lithium, manganese and nickel), was published in June 2019.