BYD is reportedly in talks with KG Mobility (KGM), South Korea's fourth-largest car maker, to jointly set up an electric vehicle (EV) battery plant in South Korea that is expected to begin operations at the beginning of 2025.
KMG confirmed that negotiations are underway but has not provided further details.
Chinese media pointed out that by manufacturing in South Korea, BYD can bypass the barriers established by the US Inflation Reduction Act (IRA) for Chinese manufacturers, and directly enter the US market. BYD's plan seems more feasible in comparison with Contemporary Amperex Technology (CATL), which has licensed its technology to Ford's US battery plant but is facing obstacles with the government.
Market sources pointed out that KMG's mid-size SUV to be launched in September will use BYD's lithium iron phosphate (LFP) batteries. CATL's LFP batteries are used by South Korean automaker Kia.
South Korea's top three ternary lithium battery makers - LG Energy Solution, SK On, and Samsung SDI - play a critical role in the global EV industry. They are also key lithium battery partners for European and American automakers, while LFP batteries are dominated by Chinese manufacturers such as CATL, BYD, and Gotion High-tech.
The rapid rise of Chinese LFP batteries in the last three years is due to a number of factors, including China being the largest EV market. The spontaneous combustion of ternary lithium batteries in the past, resulting in public misgivings, has also given rise to LFP batteries. Additionally, LFP batteries have a good price-performance ratio for midrange and low-cost EVs, which has enticed South Korea's top three battery makers to enter the market to stop Chinese manufacturers from monopolizing the market; however, their progress and scale have not been as expected. At present, Chinese LFP batteries account for 99% of the global market share.
The market speculates that in addition to being too busy to accept orders, South Korea's top three battery makers are also carrying out large-scale construction in Europe and the US, leaving little bandwidth to focus on LFP batteries. On the other hand, Chinese LFP battery makers have been continuously investing and have significantly expanded production in recent years, possibly resulting in an oversupply in 2023.
As long as Chinese companies manufacture in South Korea, a free trade partner of the US, they can sidestep IRA regulations that restrict Chinese batteries from qualifying for subsidies. Being able to enter the US market will also extend the competition between Chinese LFP battery makers and Korean ternary lithium battery makers from South Korea to the US.
Article translated by Eifeh Strom
