Chinese and South Korean battery manufacturers dominate LFP and ternary batteries for EVs and energy storage systems (ESS). However, as companies expand into foreign markets, the Chinese and South Korean governments are concerned that the overseas scale-up will pull domestic companies off the leaderboard.
Comparing the production capacity of battery cells and modules among battery makers does not offer a clear picture of industry competition. The key is where the battery goes.
Tesla's EV brand has become one of the top five ESS companies worldwide. The company has produced a limited number of battery cells and only produces large-sized 46800 ternary batteries in the US, having suspended a plan to manufacture batteries in its Berlin-Brandenburg Gigafactory.
Due to its strengths in battery management, system integration, and material innovation, Tesla can maintain its lead against China-based automakers and stay resilient in the intensely competitive Chinese car market. Following the recent launch of Xiaomi EV, BYD, Huawei-backed Aito, Geely, and Xpeng have cut their vehicle prices while Tesla raised them.
Although Tesla takes a stricter procurement strategy than many legacy automakers, most battery companies are willing to accommodate. This is because joining Tesla's supply chain will lower the risk of falling behind competitors.
According to supply chain sources, many Chinese and South Korean battery makers tried to develop their ESS business but failed. South Korean companies previously focused on ternary batteries but faced criticism because of a high incidence of thermal runaway.
China-based players hold advantages in LFP batteries but lag their European and US counterparts in system integration and sales. They also encountered challenges brought by geopolitics.
How long can top battery makers lead?
Battery production remains the core of battery companies' competitiveness. Automakers have yet to experience the battery "production hell" as they have not started volume production. ESS manufacturers have no intention of making battery cells because of the significant capital investment.
These situations explain why Chinese and South Korean battery cell makers can remain front-runners. Chinese companies hold more advantages in the sector as they invest in minerals and materials and have begun mass production.
Leading battery players are worried that they will lose their strengths in the future. As automakers gain more control over battery technology and costs, they will be more demanding with procurement, especially the European, US, and Japanese major automakers.
Ford plans to license CATL's technology and build a battery factory in Michigan. General Motors reportedly has discussed with the Chinese battery maker for a similar cooperation. The supply chain is paying close attention to the Chinese government's reaction to these projects. China has subsidized its lithium battery industry for over 10 years and expanded its application range from ESSs and power grids to EVs. The country will not be happy to see someone take over its lead.
Chinese battery makers have dominated the global LFP market with a 90% share. CATL and BYD together account for more than half of the market worldwide. LG Energy Solution, SK On, Samsung SDI, and Panasonic primarily contribute to the other half. The three South Korean battery makers have been developing LFP batteries and will launch their products after 2025.
