[Battery Turning Point IRA] Battery 3 Companies to Open a 128 Trillion Won North American Market Within 3 Years

With the implementation of the Inflation Reduction Act (IRA), the three major domestic battery companies building large-scale factories in North America are expected to record sales exceeding 100 trillion KRW in North America alone starting from 2025.

LG Energy Solution Cylindrical Battery. Photo by LG Energy Solution

The annual production capacity of the three domestic battery companies?LG Energy Solution, SK On, and Samsung SDI?will reach 428.5 GWh from 2025. This scale is close to 50% of the combined global production target of 873 GWh set by the three battery companies for 2025. Half of the batteries produced by Korean battery companies will come from North America. Considering that 1 GWh of battery capacity can produce 15,000 electric vehicles, this amount of battery capacity can supply batteries for 6.42 million electric vehicles.

As of last year, battery companies recorded sales of 240 billion to 300 billion KRW per 1 GWh. This estimate is based on the electric vehicle battery usage of each battery company (SNE Research) and the sales proportion of batteries for electric vehicles (data from each company). The North American sales of the three battery companies are expected to range from 102.84 trillion to 128.55 trillion KRW. Since most factories are being built in the form of joint ventures, actual sales are expected to be lower than the estimates.

Source=Various Companies, Unit=GWh

The three domestic battery companies are dominating the U.S. battery market. This is considered the only alternative the U.S. can choose to exclude China from the battery supply chain and maintain mobility competitiveness. Although there are European and Japanese battery companies, Panasonic is the only one capable of establishing a large-scale mass production system. Most of Panasonic’s battery production is supplied exclusively to Tesla, with whom it has collaborated for a long time.

After 2025, LG Energy Solution and Samsung SDI will also complete large-scale battery factories. The scale of North American battery sales has significant potential to grow further. Recently, LG Energy Solution decided to resume the construction of its previously postponed battery factory in Arizona, USA. The plan is to invest a total of 7.2 trillion KRW to build a 27 GWh cylindrical battery independent production plant and a 16 GWh energy storage system (ESS) lithium iron phosphate (LFP) battery production plant.

Earlier, in March last year, LG Energy Solution announced plans to build an 11 GWh cylindrical battery production plant with an investment of 1.7 trillion KRW. However, due to reasons such as high exchange rates and inflation, the plan was fully reconsidered. Nevertheless, with confidence in the rapid growth of the North American electric vehicle market, the company decided to invest more than four times the original amount, 7.2 trillion KRW, to build the factory.

The IRA presents a great opportunity not only for finished battery cell companies but also for medium and small enterprises involved in battery-related parts and materials. The domestic battery ecosystem is formed across the entire value chain, including core materials such as cathode materials, anode materials, separators, electrolytes, and copper foil, as well as raw materials like lithium and nickel.