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  • Opportunities and Tasks Ahead in the Global Battery Industry
    2021-10-15 hit 695

    Opportunities and Tasks Ahead in the Global Battery Industry


    The battery industry is a key area as we transition into green energy. With the growing emergency surrounding climate change, land transport and logistics is a rapidly changing sector; it is also the sector that takes up one-fifth of carbon production. Amidst this trend, the increased supply of electric vehicles, or EVs, emphasizes the importance of batteries. Batteries is garnering attention as they are not used only in EVs but also in next-generation mobility and robotics, such as small portable appliances, ESS, and urban air mobility (UAM).

     

    The automobile sales plummeted by 15% year-on-year in 2020, whereas the sales of EVs increased by 41%, in contrast. Since 2016, EV sales have shown exponential annual growth of 40.2% on average, and it is predicted that the demand for EV batteries will show annual growth of 19.2% on average until 2030. Meanwhile, the global market share for batteries, when looking at BEV in 2020, China (37.5%), Korea (34.7%), and Japan (19.9%), are collectively taking up more than 90% of the total market share. China gives preferential treatment for batteries produced by Chinese companies and domestically produced batteries, which means Korea is in the lead in the overseas market with a market share of 52.9% against Japan with 34.4%.

     

    China took up 43.4% of the US battery import, while Korea took up 19.% and Japan 13.2% in 2020. Recently, the US government announced its plans to make half of new US auto fleets electric by 2030, yet battery cell production by American companies remains low. Not only battery cells, but the overall production of battery materials also is at a negligible level. Therefore, the Biden administration published a battery supply review in June covering: boosting demand, strengthening raw material production, increasing domestic production, investment in R&D and human resources.

     

    The EU is on a similar page. The EU’s regional battery production capability takes up only 6.2% of the global production capability, while China takes up 25.7% of the EU’s import market (Korea 10.7% according to data from 2020). The EU aims to become completely self-sufficient in battery production by 2025 and unveiled the Strategic Action Plan on Batteries in 2018. Following the Action Plan, the EU recently approved public funding of 2.9 billion euros as part of the innovation project and additional 9 billion euros in private investments.

     

    The export of Korean batteries more than doubled from 2.07 billion USD to 4.88 billion USD between 2012 and 2020. Thanks to Korea’s expertise in cell production, we are competing for second place against Japan in the production of four major battery components (cathode, anode, separator, electrolyte) against Japan.

     

    Korea, China, and Japan have been leading the global battery market. However, major economies are recognizing the importance of batteries ? too important to be relying on overseas production ? and will make moves to restructure the supply chain. With such changes, the market environment is bound to change drastically. The major economies’ plans to establish the overarching domestic production chain for battery cells and pack from materials (excluding raw material) can be a door-opening opportunity for Korean companies. Expanding business operations in the US and the EU is a way to successfully enter a large market while simultaneously minimizing the risks associated with overseas investment through investment incentives provided by the respective governments. It will also serve as an opportunity for parts and material companies to work closely with local companies with a demand for these items in the long run.

     

    And yet, challenges remain. The restructuring of the supply chain still presents tasks for Korean companies. Battery production in Korea and direct export is bound to decline when foreign investment expands. The growth rate of global demand will be greater than that of global supply in the short run, which means its impact on domestic production will be limited. However, in the mid-to-long run, we need an alternative market and industry to make up for the lost demand. It will be critical to vitalizing the next-generation mobility and robotics industry domestically while venturing into new potential markets such as India, Brazil, Russia, and Indonesia that have a large demand for automobiles. We also must be ready to respond to the changes in the raw material price that is bound to follow the increased battery production. The production cost of per battery is predicted to fall thanks to heightened competition and technological development, but the increased cost of raw material will be a burden. Therefore, securing a stable supply of raw material is another task at hand. Similarly, technological innovation and training regarding battery safety, appropriate waste management and recycling of used batteries, and assessing the relevant cost of these questions are other challenges to be resolved. However, while they are challenges, they are also an opportunity for Korean companies to discover a brand-new market.

     

    The Korean government announced back in July the plans to turn Korea into a secondary battery powerhouse by 2030. The goal is to achieve technological development, foster a friendly environment, expanding the demand for recycling through large-scale investment. There are many strong competitors. The US and the EU, with their massive markets, are establishing regional supply chains. China is flooding the market with its price competitiveness. Japan is hoping for a game-changer with next-generation solid-state batteries. Korean companies certainly have challenges and opportunities ahead. If we were to compare semiconductors as the rice of the industry, then batteries are comparable to the oil of the industry; close cooperation between the public and the private sector is a must for the continued growth of the battery industry.

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