The Electric Vehicle Market is Rapidly Growing... When Will the Struggling 'Secondary Battery Stocks' See a Bright Future?

Despite Global Electric Vehicle Market Surge, Domestic Battery Manufacturers Lag
Samsung SDI, LG Chem, SK Innovation Adjust Since January
Expectations for Recovery in European and US EV Markets...100 Trillion Won Order Battle Anticipated

[Asia Economy Reporter Ji Yeon-jin] While the global electric vehicle (EV) market continues to grow steadily, domestic EV battery manufacturers have recently shown sluggish stock performance. The market highly anticipates growth potential as the transition to eco-friendly vehicles accelerates, with an EV battery order competition worth over 100 trillion won on the horizon.

As of 10:15 AM on the 4th, Samsung SDI was trading at 685,000 won, down 1.58% from the previous day. At the same time, LG Chem fell 0.11% to 869,000 won, and SK Innovation remained unchanged at 266,000 won compared to the previous closing price.

The three battery companies saw their stock prices surge since the second half of last year due to expectations of expanding global EV demand. Until early this year, they were considered beneficiaries of the Biden administration’s eco-friendly policies in the U.S. and led the KOSPI’s rise. LG Chem soared to 1.05 million won intraday in January, earning the title of ‘Emperor Stock,’ while Samsung SDI and SK Innovation’s stock prices jumped 4 to 6 times. However, as the domestic stock market correction that began at the end of January continued, the battery manufacturers’ stock prices also dropped significantly. Increased volatility due to LG Chem and SK Innovation’s U.S. battery lawsuits also contributed to the withdrawal of investments.

However, the EV market, which had stalled due to the COVID-19 pandemic last year, is expected to benefit significantly from the base effect this year. According to energy market research firm SNE Research’s recent report, global EV sales in January reached 326,000 units, a 103% increase compared to the same period last year. Sales in China surged by 250%, while Europe saw a 37% increase. During this period, Tesla sold 43,000 EVs, marking a 119% year-on-year growth and maintaining its global EV market share at 13%, ranking first.

During the same period, EV battery sales also rose 94% year-on-year to 13.7 GWh. Chinese secondary battery manufacturer CATL was the biggest beneficiary with a 166% increase to 4.3 GWh. Following were LG Energy Solution (2.5 GWh, +51%), Panasonic (2.1 GWh, +52%), BYD (1.2 GWh, +382%), Samsung SDI (0.7 GWh, +19%), and SK Innovation (0.5 GWh, +69%). While Chinese battery companies performed well due to strong sales in China, the three domestic battery manufacturers, which supply heavily to Europe, showed sluggish sales performance.

Looking ahead, the outlook is more optimistic. The growth momentum of the Chinese market, which led the global EV market early this year, is expected to spread to the U.S. and Europe as COVID-19 vaccinations accelerate. Typically, EV battery orders are placed 3 to 4 years in advance. Assuming global automakers’ eco-friendly vehicle sales targets reach about 30 million units by 2025, with a 50% share, battery order competitions worth over 100 trillion won are expected this year. The market capitalization to order backlog ratio for the three domestic battery companies stands at about 40% for LG Chem, 65% for Samsung SDI, and 35% for SK Innovation.

Researcher Han Sang-won of Daishin Securities said, "Since China was the first to be hit by COVID-19 last year, Chinese companies performed well in January due to the base effect, but recovery in the U.S. and Europe is expected to follow." He added, "SK Innovation’s new orders are expected to exceed its sales, so along with aggressive capacity expansion, its order backlog will also significantly increase."