Top 3 Domestic Battery Companies Tense Over Prolonged COVID-19 Situation in Europe

▲Electric Vehicle Battery Production Line

[Asia Economy Reporter Hwang Yoon-joo] The domestic electric vehicle battery industry is on high alert over the potential prolongation of the COVID-19 pandemic. There is concern that if the COVID-19 situation in Europe does not subside quickly, it could impact battery orders and the expansion of European factories.

According to the industry on the 17th, SK Innovation had already prepared response guidelines last month assuming that its European production plants would be 'shutdown' temporarily due to the COVID-19 outbreak, ensuring no disruption in supply and demand for the first half of this year.

A senior official at SK Innovation said, "After experiencing Japan's export restrictions and China's shutdowns, we prepared manuals in advance to prevent production disruptions if similar situations occur at overseas plants. When Battery Business CEO Ji Dong-seop visited in January, inspections of logistics and movement restrictions at the Hungary plant were already completed."

Samsung SDI is also controlling the response measures and quarantine guidelines for its Hungary plant through a task force (TF) established during the COVID-19 outbreak. LG Chem has strengthened its quarantine system at its Poland plant by conducting fever checks on workers, providing hand sanitizers, and encouraging restraint in using external restaurants to prevent confirmed COVID-19 cases.

According to the World Health Organization (WHO), as of yesterday (4 PM), Hungary has 32 confirmed COVID-19 cases, and Poland has 150. With the rapid increase in confirmed cases, the Hungarian government has banned entry of travelers from Korea, and Poland has prohibited entry of foreigners.

In Hungary, SK Innovation (Kom?rom) and Samsung SDI (Gy?r) are operating battery plants. In Poland, LG Chem (Wrocław) is producing batteries. Since European automakers will begin full-scale electric vehicle launches from the second quarter of this year, the domestic battery industry has already established production bases in Eastern Europe.

Due to environmental regulations by the European Union (EU), the volume of electric vehicles that European automakers must sell in Europe is expected to reach 1.9 million units in 2020 and 2.4 million units in 2021. This is 3 to 4 times the volume of last year (600,000 units).

The problem arises if the COVID-19 situation in Europe prolongs. The domestic battery industry has already prepared battery supply and factory operation countermeasures considering the spread in Europe and the US. If the situation continues into the second half of the year, it is expected to cause disruptions not only in battery orders but also in the expansion of European factories.

Park Yeon-ju, a researcher at Mirae Asset Daewoo, said, "Considering the shrinking internal combustion engine vehicle market and Tesla's expanding market dominance, it is difficult for automakers to change their electric vehicle strategies, but if battery production is disrupted due to COVID-19, more volume will need to be produced in the second half of the year."