South Korean sources report that battery manufacturers in the country are facing a decline in capacity utilization for the production of battery cells. This is due to declining global demand for electric vehicles and pressure from Chinese competitors. Companies do not have much hope for a happy outcome from this situation, but continue to fight for their place in the sun.
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The report covers the activities of LG Energy Solution, Samsung SDI and SK On – these are the three largest battery manufacturers in the Republic of Korea. In 2024, the capacity utilization level of all three companies decreased significantly compared to 2023. This is believed to reflect a global decline in demand for electric vehicles. The downturn has led these companies to take a number of strategic measures as they face difficult market conditions.
According to industry reports dated December 30, the average utilization rate of LG Energy Solution plants in the third quarter of this year was 60%, down significantly from 73% in the same period last year. SK On saw an even steeper decline, with production line utilization falling to a record low of 46%, down from 95% last year. Samsung SDI, which only discloses figures for small cell production, reduced line utilization by 9%, bringing that figure to 68%.
A decrease in production volumes makes it difficult to keep wages at the proper level and reduces the profitability of enterprises. This is largely blamed on a slowing recovery in global demand for electric vehicles. Thus, one of the largest battery customers, Tesla, sold 1.425 million electric vehicles worldwide between January and October 2024, or 1.1% less than a year earlier for the same period. Sales of electric vehicles from Hyundai Motor and Kia fell similarly – to 455 thousand units, or by 3.4% year-on-year.
Overall, during the above period, the global market share of LG Energy Solution, Samsung SDI and SK On fell to 20.1%, which is significantly lower than 31.7% in 2021. In contrast, Chinese companies such as CATL and BYD increased their market share from 39.7% to 53.6%, helped by strong government support, a robust domestic market and the cost advantages of low-cost LFP batteries.
In response to these challenges, the South Korean battery industry declared a state of emergency and focused on preparing countermeasures. For example, SK On, which went into emergency mode in July, froze the salaries of all executives until profitability was restored and introduced voluntary retirement for pre-retirement employees for the first time since its founding. LG Energy Solution, as part of its crisis management strategy, has minimized the expansion of its workforce. Samsung SDI appointed Choi Joo-sun, the former president of Samsung Display, as its new chief in November, signaling a management overhaul.
Companies expect market uncertainty to increase further with the return of Donald Trump to the US White House, who has promised to end subsidies for electric vehicles. The industry hopes to counter the threats with next-generation products, such as the new 4680 cell size.
LG Energy Solution is expected to begin mass production of the 4680 battery (46mm diameter, 80mm height) for Tesla at its Ochanga plant as early as the first quarter of 2025. The company has also signed contracts to supply 46mm batteries with Mercedes-Benz and Rivian. Samsung SDI also plans to begin mass production of 46mm batteries for electric vehicles in early 2025 and is in talks with various companies to supply them.
Industry insiders say: “At the end of the day, we have no choice but to compete on quality. As [South Korean] domestic ‘cell’ companies begin full-scale mass production of 4680 batteries, they will likely increase their market share.”