South Korea’s LG Energy Solution (LGES) is talking to three Chinese suppliers to make cheaper electric vehicle (EV) batteries for Europe. This comes after the European Union (EU) added extra tariffs on EVs built in China. LGES is trying to lower battery prices as the global EV market slows down and automakers demand cheaper batteries to compete with Chinese rivals.
Renault, a French carmaker, plans to use lithium iron phosphate (LFP) batteries for its EVs, partnering with LGES and Chinese company CATL to build a supply chain in Europe. This follows the EU’s decision to add up to 38% tariffs on Chinese EVs after an anti-subsidy investigation. This decision has led to more investment by Chinese EV makers and battery firms in Europe.
The cathode, a key part of the EV battery, is the most expensive and makes up about a third of the battery cost. China leads in producing LFP cathodes, with top producers like Hunan Yuneng New Energy Battery Material, Shenzhen Dynanonic, and Hubei Wanrun New Energy Technology.
EV batteries mainly use two types of cathodes: nickel-based and LFP. Nickel-based cathodes store more energy but are costly. LFP cathodes, common in Chinese EVs like those by BYD, hold less energy but are safer and cheaper.
South Korean battery companies have focused on nickel-based batteries but are now moving into LFP battery production due to pressure from automakers wanting more affordable EVs. LGES is considering Morocco, Finland, and Indonesia as locations to produce LFP cathodes with Chinese partners for Europe.
LGES is also discussing LFP battery deals with automakers in the U.S., Europe, and Asia, but Europe shows stronger demand for affordable EVs. Affordable EVs make up about half of Europe’s EV sales, more than in the U.S.
In the first five months of this year, LGES and other South Korean battery makers had a 50.5% share of the European EV battery market, with LGES at 31.2%. Chinese rivals had a 47.1% share, led by CATL at 34.5%.
LGES has joint ventures with General Motors, Hyundai Motor, Stellantis, and Honda. However, some equipment installations for expansions might be delayed by up to two years due to the slow demand. LGES expects EV demand to recover in about 18 months in Europe and two to three years in the U.S., depending on climate policies and regulations. LGES shares fell by 1.4% after Tesla’s weak results, while the wider KOSPI market dropped by 0.6%.
