South Korea’s LG Energy Solution (LGES) is negotiating with three Chinese suppliers to produce cost-effective electric vehicle (EV) batteries for the European market. This initiative follows the European Union’s imposition of additional tariffs on EVs imported from China, signaling increased competition in the industry. The potential collaborations reflect the mounting pressure on non-Chinese battery manufacturers to lower prices to compete with their cheaper Chinese counterparts.
Recently, France’s Renault announced plans to incorporate lithium iron phosphate (LFP) battery technology into its mass-produced EVs, partnering with LGES and Chinese rival CATL to establish a supply chain in Europe. This announcement came after the European Commission’s decision to impose up to 38% extra tariffs on Chinese EVs, which has spurred significant investment commitments from Chinese EV makers and battery firms in Europe.
Wonjoon Suh, head of LGES’ advanced automotive battery division, stated, “We are having talks with Chinese firms who will develop LFP cathode with us and produce them for Europe.” Suh mentioned that various options, including joint ventures and long-term supply deals, are being considered to help LGES reduce its LFP battery manufacturing costs to levels competitive with Chinese producers within three years. The cathode is the most expensive component of an EV battery, accounting for about a third of the overall battery cell cost.
China currently leads global LFP cathode supplies, with major producers including Hunan Yuneng New Energy Battery Material, Shenzhen Dynanonic, and Hubei Wanrun New Energy Technology. While most EV batteries use either nickel-based or LFP cathodes, nickel-based ones, like those in Tesla’s longer-range models, store more energy but are more expensive. Conversely, LFP cathodes, favored by Chinese EV makers like BYD, are safer and less costly due to the abundance of materials used.
South Korean battery manufacturers have traditionally focused on nickel-based batteries but are now expanding into LFP production to meet the demand for more affordable EV models. Suh revealed that LGES is considering three potential locations—Morocco, Finland, and Indonesia—to produce LFP cathodes with Chinese firms for the European market.
LGES is also negotiating LFP battery supply deals with automakers in the United States, Europe, and Asia, with Europe showing the highest demand for affordable EV models. In Europe, affordable EVs make up about half of all EV sales, higher than in the U.S.
According to SNE Research, South Korean battery makers, including LGES, Samsung SDI, and SK On, held a combined 50.5% share of the EV battery market in Europe during the first five months of this year, with LGES alone accounting for 31.2%. Meanwhile, Chinese battery firms, led by CATL, captured 47.1% of the market.
LGES has existing battery joint ventures with General Motors, Hyundai Motor, Stellantis, and Honda Motor. However, due to the slowdown in EV demand, some equipment installations for expansions might be delayed by up to two years. Suh predicted that EV demand would recover in about 18 months in Europe and two to three years in the U.S., depending on climate policies and other regulations.
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