Korean, Chinese Firms in Talks on EV Batteries for Europe

South Korean battery makers are in talks with Chinese suppliers to produce low-cost batteries for electric vehicles that will be sold in Europe.

A senior executive with LG Energy Solution (LGES) said they were discussing potential partnerships with three Chinese firms.

However, negotiations have been affected by two concerns – the threat of extra tariffs slapped on Chinese EVs by the European Union, plus a global slowdown in demand for EVs, which has put pressure on non-Chinese firms to match the lower prices of Chinese rivals.

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France’s Renault said this month that it would include lithium iron phosphate (LFP) battery technology in its plans to mass produce EVs, choosing LGES and its Chinese rival CATL as partners to build a supply chain in Europe.

The announcement followed the European Commission’s decision in June to impose an extra tariff of up to 38% on EVs imported from China after a months-long anti-subsidy probe that has prompted a flurry of investment pledges by Chinese EV makers and battery firms in Europe.

“We are having talks with Chinese firms who will develop LFP cathode with us and produce them for Europe,” Wonjoon Suh, leader of LGES’ advanced automotive battery division, said, although he declined to name the companies.

“We are considering various measures, including setting up joint ventures and signing long-term supply deals,” he said, adding such a partnership should help LGES lower its LFP battery manufacturing costs to levels matching its Chinese rivals in three years.

Cathode is the single most expensive element of an EV battery and accounts for about a third of the overall cost of a battery cell.

China dominates LFP cathode supplies globally and its biggest producers are Hunan Yuneng New Energy Battery Material, Shenzhen Dynanonic, Hubei Wanrun New Energy Technology, according to battery market tracker SNE Research.

Most EV batteries today use one of two types of cathodes: nickel-based or LFP.

Nickel-based cathodes, like those used in longer-range Tesla models, are capable of storing more energy, but use costly materials. LFP cathodes, popular with Chinese EV makers like BYD, typically do not hold as much energy, but they are safer and tend to be less expensive because they use materials that are more abundant.

South Korean battery firms have focused on producing nickel-based batteries and are now expanding into LFP battery production that Chinese rivals dominate, pressured by automakers looking to expand their product lineups to more affordable models.

Battery-makers ponder three possible sites

Suh said LGES is considering three locations – Morocco, Finland and Indonesia – to produce LFP cathodes with Chinese firms for the European market.

LGES has been discussing LFP battery supply deals with automakers in the United States, Europe and Asia. But Europe has stronger demand for affordable EV models, with the segment accounting for about half of the region’s EV sales, higher than in the US, he said.

South Korean battery makers LGES, Samsung SDI, and SK On, had a combined 50.5% share of the EV battery market in Europe in the first five months of this year, with LGES’ share standing at 31.2%, according to SNE Research. Chinese battery rivals had a 47.1% market share in Europe, led by CATL at 34.5%.

LGES has existing battery joint ventures with General Motors, Hyundai Motor, Stellantis and Honda Motor at a time when EV sales growth is slowing.

Suh said the installation of some equipment needed for expansions could be delayed for up to two years in agreement with the partners due to the demand slowdown.

He forecast EV demand would recover in about 18 months in Europe and two to three years in the United States, but would depend in part on climate policies and other regulations.