BriefCASE: South Korean companies eye low-cost LFP battery market

Intensifying competition and slowing demand for battery-electric
vehicles are pressuring carmakers to lower manufacturing costs. The
lithium iron phosphate (LFP) battery technology is emerging as a
key step in cost control, with almost all major global automakers
looking to integrate the battery chemistry into their product
portfolios.

While mainland Chinese companies such as Contemporary Amperex
Technology Co. Ltd. (CATL) and BYD continue to dominate the LFP
battery manufacturing ecosystem, US and European legacy carmakers
are now looking to build local LFP battery supply chains to cut
battery costs by 30%-40%. This vendor diversification strategy is
expected to create opportunities for South Korean battery companies
such as LG Energy Solution (LGES), SK On and Samsung SDI to
increase their stake in the LFP market. Pushed by new market
dynamics, South Korean battery-makers, known for their expertise in
nickel-based lithium batteries, are accelerating the development of
LFP technology. This is also fueled by the expiry of core LFP
patents in 2022, allowing LFP battery production outside of
mainland China.

Renault picks LG Energy, CATL to build LFP ecosystem in
Europe

In July, Renault announced the battery strategy for its
EV business, Ampere. The company signed deals with LGES and CATL to
build an LFP battery value chain in Europe. Ampere's plan entails
integrating LFP technology in parent Renault's existing battery
strategy, which was heavily reliant on using the nickel cobalt
manganese or NCM chemistry.

LGES and CATL are assigned to provide Ampere with the LFP
batteries that will power several EV models from the Renault and
Alpine brands until 2030. CATL will supply LFP batteries to Ampere
from its Hungary-based plant and LGES will supply NCM and LFP
batteries from its Poland-based facility. The first Renault models
with LFP technology are scheduled to launch in early 2026.

LGES signed a five-year contract with Renault to
supply LFP batteries to Ampere from late 2025 through 2030, with a
total capacity of approximately 39 GWh to power about 590,000 BEVs.
The deal is LGES' first large-scale supply deal for LFP batteries
and could indicate that South Korean battery companies are a
suitable alternative to their Chinese counterparts for LFP
batteries.

LGES claims that it will offer a competitive price for its LFP
batteries. According to the company, the price advantage in LFP
will also come from implementing the cell-to-pack strategy in the
manufacturing process. Although CATL and BYD offer LFP batteries in
cell-to-pack design, LGES claims to be the first to apply the
technology to pouch-type batteries. Renault said the integration of
LFP and cell-to-pack technologies will enable Ampere to reduce the
cost of batteries by about 20% in its vehicles starting in
2026.

Samsung SDI and SK On target mass production in
2026

SK On is reportedly in different stages of discussions with its
customers for the supply of LFP batteries. SK On's Chief Executive
Lee Seok-Hee told The Korea Times in March that the
company internally wrapped up the process of developing LFP
batteries and is now looking to mass produce them as early as 2026.
At the InterBattery 2024 conference in March, SK On displayed its
Winter Pro LFP Battery, which has 19% more energy density than
regular LFP batteries and has significantly improved charging and
discharging capacity.

Samsung SDI, which disclosed its plan to start developing LFP
batteries on the sidelines of its fourth-quarter 2023 earnings
call, unveiled a prototype LFP battery at the same conference.
Sharing its business outlook for the second half of 2024, the
company said in July that it plans to set up a dedicated pilot
production line for LFP batteries at an undisclosed site in South
Korea, with a target to mass produce these batteries in 2026.

Business opportunity for South Koreans

“According to the battery price model at S&P Global
Mobility, the price of LFP batteries in China has reached $52 per
kWh in 2024, which is approximately 25% lower than the price of
NCM811 batteries. This significant reduction has enabled price
parity between BEVs and internal combustion engine vehicles in
China, marking a major milestone in the e-mobility transition,”
said Ali Adim, manager, technical research at S&P Global
Mobility. “In contrast, North America and Europe, which lack access
to such economical batteries, are struggling to sell their EVs.
Consequently, South Korean battery manufacturers have been
compelled to adopt LFP chemistry to avoid losing market share.”

Despite the gap between Chinese and Korean suppliers in LFP
production expertise and supply chain management, there is a
compelling business case for Korean manufacturers in Europe and
North America, largely due to their strong relationships with
carmakers in these regions, Adim added.

Authored by: Amit Panday, Senior Research Analyst,
Supply Chain & Technology, S&P Global Mobility

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