Korean battery majors scale up investment in North American market

[Photo provided by LG Energy Solution]

South Korea’s electric vehicle battery giants LG Energy Solution Ltd., Samsung SDI Co. and SK on Co. are actively expanding their business in North America in line with the U.S. government’s decision to increase the proportion of new EV sales to more than 10 times the current rate by 2032.

According to industry sources on Monday, the three companies are accelerating their efforts to increase presence in the North American market through strategies such as investment expansion, yield improvement and product diversification. The three battery makers see this market shift as an opportunity and are leveraging their strategies to seize the local market.

The Korean battery industry plans to scale up investments in response to the increase in demand. Despite rising construction costs, the industry is willing to invest in North America aggressively in anticipation of significant benefits of the Advanced Manufacturing Production Tax Credit (AMPC), which is designed to offer a tax deduction of $35 per kilowatt-hour for battery cells and $10 per kilowatt-hour for modules produced in North America under the Inflation Reduction Act (IRA).

LG Energy Solution, which recently announced its preliminary first quarter results, saw a benefit of more than 100 billion won ($75.8 million) in operating profit from AMPC, prompting other companies to follow.

Investment banking sources expect LG Energy Solution to gain an operating profit effect of 149.2 billion won from AMPC in the second quarter, 223.8 billion won in the third quarter and 290.1 billion won in the fourth quarter, totaling around 800 billion won. In annual terms, operating profit effect from AMPC is expected to reach 2.6 trillion won in 2024 and 5.6 trillion won in 2025.

The industry expects that LG Energy Solution’s operating profit could total 8.5 trillion in 2025, including AMPC benefits, indicating that subsidies could account for more than half of its profit.

[Photo provided by Samsung SDI]

For the Korean battery giants, early stabilization of local production is also a key to success in the North American market. SK on is building a quality certification center to enhance its trustworthiness. SK innovation Co., parent of SK on, has invested over 3.5 trillion won in SK on’s U.S. operation.

Samsung SDI, known for maintaining a yield rate of up to 90 percent to 95 percent, is also actively expanding its business in North America.

Samsung SDI will focus on raising yields early on at its two joint venture plants with Stellantis N.V. and General Motors Co., which are under construction in the U.S.

“Increasing the supply volume in the U.S. will require more facility equipment and facility efficiency need to be raised to more than 80 percent to stay economically beneficial. The problem is that it is not easy to stabilize the factory even if you have operational experience, and if it takes a long time reach stability, there could be a conflict between automakers and battery companies,” an industry insider said.

The three battery majors are also looking to diversify their product portfolio. LG Energy Solution will have a lithium iron phosphate (LFP) battery plant for energy storage system capable of producing 17 gigawatt hours of batteries per year by 2026. All three companies have announced plans to launch LFP batteries. LG Energy Solution is also expected to enter the LFP battery market for electric vehicles, starting with LFP batteries for ESS in the U.S.

SK on is also focusing on the development of new battery types and a joint venture with Hyundai Motor Group to build a plant in the U.S. SK on currently produces only pouch batteries in North America and is struggling to seek ways to respond to the growing demand for cylindrical and prismatic batteries.