[NEWS ANALYSIS] Korean battery makers face speed bumps as EV hype fades

Industry

Published: 04 Nov. 2023, 06:00

[NEWS ANALYSIS] Korean battery makers face speed bumps as EV hype fades

EVs are being charged at a charging station in downtown Seoul on Aug. 16. [YONHAP]

Korean battery makers may need to brace themselves for a tough year-end as global automakers scramble to pause their EV plans amid slowing demand.

EV sales are still growing but at a sharply reduced rate, forcing carmakers to pump the brakes on their joint battery plants with Korean battery makers.

LG Energy Solution said Thursday it decided to delay production at its joint battery plant in Tennessee by a few months as General Motors is downsizing its EV production capacity.

The Tennessee plant in Spring Hill, which was set to become operational at the end of the year, will start operation early next year.

The Tennessee plant is Ultium Cells’ second plant in North America, along with one in Ohio and Michigan. Formed in 2019, Ultium Cells is a 50:50 joint venture between LG Energy Solution and General Motors that vowed to invest a total of 8.4 trillion won ($6.35 billion) in the three plants.

General Motors also withdrew its target of producing 400,000 EVs by the first half of next year amid the weak demand.

SK On-Ford's battery plant in Kentucky [SK ON]

The automaker has also announced a one-year delay in starting the production of its electric pickup trucks at its Michigan plant.

Ford also said it will delay the operation at its Kentucky plant — a joint venture with SK On — in the midst of weakening EV sales.

The two are building a total of three factories in the United States — one in Tennessee and two in Kentucky. The operation of the No. 2 plant in Kentucky has been delayed, which was scheduled to start in 2026.

“The delay has been considered due to the recent slowdown in the EV market,” said a spokesperson for SK On. “It’s just a delay in operation, and we’re proceeding with the construction according to plan and the investment plan has not been changed,” the spokesperson said.

The two factories will start operation in 2025.

Tesla CEO Elon Musk also hinted at a possible delay in the construction of a plant in Mexico and the mass production of its Cybertrucks, after it reported a 44 percent fall in net profit in the third quarter compared to a year earlier.

Tesla EVs are being charged up at a Tesla Supercharger station in California on Feb. 27. [EPA/YONHAP]

The automakers’ toned-down plans come as the pace of growth is slowing constantly.

A total of 4.34 million EVs were sold in the first half, according to data from market tracker MarkLines. It’s still up 41 percent on year but fell far short of 2021's 115 percent skyrocket growth and 2022's 61.2 percent growth.

Some 557,330 EVs were sold in the United States in the first half, up by 50 percent on year. The growth rate fell far short of last year's 71 percent compared to the previous year. EV sales in China rose by 32 percent in the first half compared to the same period last year, with the on-year growth rate only a third of the previous year, when the rate stood at 109 percent.

“The EV market, especially in European countries, is clearly showing a slowdown,” said Han Byeong-hwa, a researcher at Eugene Investment & Securities. “The decline is inevitable in the U.S. market if a Republican holds the presidency.”

Battery markets project a poor outlook at least until next year, with plunging raw materials prices that lead to a fall in battery prices.

SK On once again failed to make a profit in the third quarter, logging 86.1 billion won in operating losses. It has been losing money for 11 consecutive quarters now.

It reported 344.7 billion won in losses in the first quarter and 132.2 billion won in losses in the second quarter.

“With our major client’s conservative EV production plans, there is some possibility that the contract volume will be adjusted,” said Lee Chang-sil, chief financial officer at LG Energy Solution at a conference call revealing the company’s third quarter earning report.

“Prices of raw materials like lithium and nickel are decreasing, which will eventually drag down the battery prices.”

Samsung SDI also expressed concerns about a “slowdown in demand in the short term,” though it expects rosy prospects for middle- and long-term growth,” according to Executive Director Kim Jong-sung.

Samsung SDI missed market consensus by posting 496 billion won in operating profit in the third quarter.

BY SARAH CHEA [chea.sarah@joongang.co.kr]