South Korean battery industry expected to benefit from Europe's China restrictions

Daniel Chiang, Taipei; Peng Chen, DIGITIMES Asia 0

Credit: SK On

Europe has launched an anti-subsidy investigation on China-made EVs after announcing the Critical Raw Materials Act (CRMA) and Batteries Regulation. The act will likely impact China-based battery makers and benefit their South Korean competitors. European carmakers are expected to use more South Korean batteries in the coming years.

According to South Korea-based Maeil Business Newspaper, industry sources said the US Inflation Reduction Act (IRA) restricts the development of Chinese EV companies in the US, prompting them to look for new opportunities in Europe. If the European Union decided to impose a 10% to 15% tariff on EVs made in China, the Chinese automakers will take a hit. The situation will also likely impact Chinese battery companies as China-made EVs are usually equipped with locally made batteries.

South Korean battery manufacturers who have entered the European market are looking to gain more opportunities from the EU's move. In 2017, LG Energy Solution and Samsung SDI established EV battery plants in Poland and Hungary, respectively. LGES supplies Volkswagen, while Samsung SDI provides batteries for BMW and other carmakers.

SK On, which joined the European market later, also set up a battery factory in Hungary, planning to grow production capacity from 17.5GWh to 47.5GWh by 2024.

In March 2023, the EU released the draft of CRMA, seen as the European version of IRA. The regulations aim to reduce the continent's dependence on a third country for critical raw materials to below 65%. While China was not named out, it was the only country that the EU relies on 65% for critical materials.

The European Council approved the Batteries Regulation in June this year. The law covers carbon footprints, supply chains and battery passports. Industry sources said sales of China-made batteries will likely be hampered because their greenhouse gas emission from production probably will not meet the EU's requirements. South Korean battery makers are falling behind in battery passports and supply chain monitoring and need more active moves.