[Biz View] Price War or Cost Reduction... The Reason Why Korean Battery Alone Lowered Prices

Electric Vehicle Battery Prices Rebound This Year After Years of Decline
Rising Battery Demand and Soaring Raw Material Costs Impact Market
China and Japan Raise or Freeze Export Battery Prices to US
South Korean Batteries Attract Attention with 14% Price Cut Compared to Last Year

Electric vehicle battery factory in Hefei, Anhui Province, China

[Asia Economy Reporter Choi Dae-yeol] It is no exaggeration to say that the price of electric vehicles is largely determined by the battery. In the past, battery costs far exceeded half of the vehicle price, but although they have gradually decreased, the industry still estimates them to be around 20-30% of the final vehicle price. If a car using a battery similar to that of the Ioniq 5 had been released in 2014, the battery alone would have cost well over 50 million KRW. Currently, after several years, the price of a battery with the same capacity is estimated to be just over 10 million KRW. (Based on BNEF’s annual average battery cell and pack price data. Ioniq 5 battery capacity: 72.6 kWh)

Battery prices have dropped by about 90% compared to over a decade ago, but the recent decline has slowed. This is due to the rise in raw material prices, which account for about 60% of battery costs. According to data from the Korea Resource Information Service, the price of battery-grade lithium carbonate was about 43,500 yuan per ton (approximately 8.03 million KRW) as of June last year, but by mid-last month, it surged more than threefold to 179,750 yuan per ton (approximately 33.2 million KRW). Nickel prices exceeded 20,000 USD per ton in late last month, marking the highest level since 2016. This increase is due to rising demand driven by the expansion of electric vehicle adoption.

Recent 3-Year Price Trends of Battery-Grade Lithium Carbonate <99.5%, Unit: Yuan/t, Source: Korea Resources Information Service>

In China, the world’s largest battery producer, there are also movements to raise battery prices. According to market research firm Benchmark Mineral Intelligence, Chinese lithium-ion battery manufacturers have recently indicated their intention to increase prices to electric vehicle companies and other clients, citing rising raw material costs. Typically, electric vehicle battery contracts are known to reflect the market prices of key materials. The falling battery prices have contributed to the expansion of electric vehicle adoption, but this trend may now face obstacles.

In this situation, Korean battery companies stand out. While Chinese and Japanese battery manufacturers have either frozen or raised prices, Korean batteries continue a steady downward trend. This tendency is clear when looking at the amounts the United States, the world’s largest battery importer, pays for imports from each country. As of August, the import price of Korean batteries into the U.S. was 29.9 USD per kilogram, about 14% lower than last year’s average of 34.7 USD. Monthly data also shows a slight downward trend.

On the other hand, prices for Chinese batteries have risen compared to last year. The export price of Chinese batteries to the U.S. was 23.9 USD per kilogram, up 4% from last year’s 22.9 USD. After hitting a record low in May, prices have steadily increased. Japanese batteries maintained nearly the same level at 47.7 USD per kilogram compared to last year’s 47.9 USD.

President Moon Jae-in visited SK Innovation's electric vehicle battery plant in Georgia, USA, last May, touring the production line and receiving explanations.

Leading Global Battery Production: Korea, China, Japan
Differentiated Pricing Strategies by Largest Importer U.S.
China Raises Prices, Japan Freezes Prices... Only Korea Lowers Prices, Drawing Attention

Since the beginning of this year, the U.S. has driven the expansion of electric vehicle adoption, causing a sharp increase in battery demand and significantly increasing battery imports from overseas. Korea, China, and Japan account for over 95% of global battery supply, and about 80% of lithium-ion batteries imported by the U.S. come from these three countries. For Korea, China, and Japan, the U.S. has become the largest battery export destination since last year and this year.

The recent decline in battery prices over the past few years was possible because global major battery companies achieved economies of scale and focused on technological development, such as reducing the proportion of expensive materials. Nevertheless, with rapidly increasing demand and soaring raw material prices, finished product prices are rising, but Korea appears to be moving in the opposite direction. Considering that the prices of batteries exported by Korean companies from large-scale factories in Hungary and Poland to the U.S. have also fallen compared to last year, it is interpreted that Korean companies are leading the price reductions in batteries.

Battery for Ford's electric pickup truck F-150 Lightning prototype

Since battery price information is treated as trade secrets, specific backgrounds for each company are not disclosed. However, the industry believes that fierce competition for battery orders in the global electric vehicle market has led to price reductions. Large domestic battery companies such as LG Energy Solution and SK On are no longer expanding facilities after securing customers as in the past, but are pursuing a ‘build first, secure orders later’ strategy.

They judged that increasing scale first to raise market share would enhance business competitiveness. Sacrificing profits to lower prices and secure customers is an old but proven strategy. There are also claims that price reductions are due to research and development results. Samsung SDI’s new product ‘Gen5,’ which began mass production last month, reportedly reduced material costs by about 20% by increasing nickel content and changing the material composition. Material costs are known to account for about 60% of battery prices.