Domestic electric vehicle battery manufacturers are in a dilemma in the global market. A bill was passed in the United States to end the tax credit system for electric vehicle buyers in September, while in Europe, market share continues to decline due to competition with Chinese battery companies.
The U.S. House of Representatives approved the 'One Big Beautiful Bill Act (BBB)' on the 1st, which had passed the Senate. This bill contains significant cuts to the green energy-related subsidies introduced by the previous Biden administration. It is set to take effect once signed by President Donald Trump.
Under the Inflation Reduction Act (IRA) introduced during the Biden administration, people purchasing electric vehicles that meet origin requirements receive a tax credit benefit of up to $7,500 (about 10.2 million won). However, the newly enacted bill decided to end this benefit after September 30. As a result, there is a greater possibility of decreased electric vehicle sales in the U.S. starting in October.
In recent years, domestic battery manufacturers and battery component companies have been building factories in the United States. LG Energy Solution operates three standalone factories in Holland and Lansing, Michigan, and Arizona, and is also constructing joint factories with automakers such as Hyundai and Honda. SK On, which has a standalone factory in Georgia, is additionally building factories in partnership with Ford, while Samsung SDI is constructing a factory in Indiana in collaboration with Stellantis.
Domestic battery manufacturers have invested large sums and rapidly moved to construct local factories, expecting the U.S. electric vehicle market to steadily grow due to IRA benefits. However, this year, President Trump decided to abolish various subsidies previously provided for electric vehicles, leading battery manufacturers to face a crisis of plunging demand due to a contraction in upstream industries.
In Europe, which is also considered one of the two key global markets along with the U.S., domestic battery manufacturers are losing market share as they face aggressive competition from Chinese firms. European automakers prefer cheaper Chinese batteries to cut costs, thus leaving little room for domestic companies.
According to Samil Management Research Institute, the combined market share of the three domestic battery companies in Europe reached 70.9% in 2021, but fell to 45.6% last year. LG Energy Solution saw its market share drop from 46.1% to 27.6%, and Samsung SDI shrank from 12.8% to 8.8%. In contrast, the market share of the world's largest battery manufacturer, China's CATL, rose from 17.2% to 37.5%, securing the top position in the European battery market.
Recently, Chinese battery companies have been building factories in Europe to avoid tariffs and reduce transportation expenses. CATL announced plans to establish a third battery joint factory in Spain in partnership with Stellantis, following its facilities in Germany and Hungary. BYD, which is constructing factories in Hungary and Turkey, also stated plans to build new factories in Europe.
For domestic manufacturers, LG Energy Solution has a factory in Wrocław, Poland, while SK On and Samsung SDI are also producing batteries locally in Hungary. If China continues to build new factories in Europe as planned, there are concerns that domestic companies will face even more challenges in price competition due to large-scale supply.
Amid the shrinking electric vehicle market and the offensive from Chinese companies, domestic battery manufacturers are recently turning their attention to the Energy Storage System (ESS) market. ESS is a means of storing electricity for use when needed, and demand is increasing due to the expansion of data centers driven by growth in the AI market and the expansion of renewable energy.
LG Energy Solution began mass production of ESS batteries at its Holland factory in Michigan last month. Initially, LG Energy Solution planned to build a new factory in Arizona to produce ESS batteries starting next year, but due to the ongoing slump in the electric vehicle market, it changed plans and commenced early mass production at the Holland factory, which has been making electric vehicle batteries. Samsung SDI is also targeting the North American and European ESS markets by signing a supply contract with German ESS manufacturer TES last month.
A representative of a domestic battery manufacturer noted, 'While the ESS market is rapidly growing, it is still significantly lacking to compensate for the declining demand in the electric vehicle market.' They urged the government to urgently establish various measures to revive the struggling industry, including the introduction of a direct refund system for tax credit amounts.