"Global 6 Battery Companies to Invest 362 Trillion Won by 2030"…SNE Research

Global Battery Supply May Face Shortage After 2030
K-Battery Big 3 Expected to Improve Profit Margins Despite Sales Slowdown

On the 25th, Oh Ik-hwan, Vice President of SNE Research, is speaking at the '2024 Next Generation Battery Seminar (NGBS)' held at the Korea Science and Technology Center in Gangnam-gu, Seoul, hosted by SNE Research. 2024.3.25
[Photo by Yonhap News]

As the growth of the global electric vehicle (EV) market slows down, domestic battery companies are struggling, but there is a forecast that profit margins will improve despite a decline in sales this year. It is also predicted that the global oversupply of EV batteries will continue for 2 to 3 years, but after 2030, supply may fail to meet demand.

On Ik-hwan Oh, Vice President of SNE Research, said at the '7th NGBS Seminar' held on the 25th at the Science and Technology Center in Gangnam, Seoul, "This year, LG Energy Solution and Samsung SDI are expected to maintain profit margins in the 5% range, and SK On is expected to reduce its deficit," adding, "Although sales growth will slow down in 2024-2025 due to worsening market conditions, the profit margins of K-battery companies will improve significantly."

Vice President Oh cited the Advanced Manufacturing Production Tax Credit (AMPC) under the U.S. Inflation Reduction Act (IRA) as a major factor in the performance improvement of domestic battery companies. SNE Research expects LG Energy Solution and Samsung SDI to record operating profit margins in the 10% range next year, and SK On to turn profitable. The sales of the three domestic battery companies are expected to grow by 11-16% this year and slightly improve to 17-18% growth next year.

The oversupply situation of batteries is expected to gradually improve, and there is also a forecast that by 2030, there could be a supply shortage.

Vice President Oh explained, "After 2030, battery manufacturers' capacity expansion plans have not been finalized," adding, "Considering the competitiveness among battery manufacturers and the challenges for new entrants to secure mass production technology, short-term supply shortages may occur in some regions."

Chinese companies' announced expansion plans in Europe are unlikely to be fully realized, and the lack of technological capabilities among European startups is another reason for the long-term forecast of supply shortages. Especially in the North American region, due to restrictions on Chinese companies' entry under the IRA, a supply shortage is expected after 2030.

However, this forecast is based on currently announced investment plans, and if battery companies proceed with expansions in the future, actual supply shortages may not occur.

SNE Research expects the sales volume of electric vehicles (excluding HEVs) to grow at an average annual rate of 15%, reaching 75 million units by 2035. This accounts for 79% of the total automobile market. Batteries for electric vehicles are expected to grow at an average annual rate of 17% during the same period, reaching 4,760 gigawatt-hours (GWh) by 2035.

The production capacity of batteries for electric vehicles and energy storage systems (ESS) of six global battery companies?LG Energy Solution, Samsung SDI, SK On, CATL, BYD, and Panasonic?is expected to increase from 1,169 GWh in 2023 to 3,868 GWh in 2030. Considering that facility investment costs about 100 million dollars per GWh, the investment in production facilities by these six battery manufacturers is estimated to reach approximately 270 billion dollars (about 362.475 trillion Korean won) each.

By company, CATL is expected to make the largest investment at 72.5 billion dollars, followed by LG Energy Solution at 41.9 billion dollars, Samsung SDI at 34.8 billion dollars, SK On at 36.3 billion dollars, BYD at 48.6 billion dollars, and Panasonic at 32.8 billion dollars.

SNE Research also expects Tesla and BYD to continue their strong presence in the global EV market. Vice President Oh said, "Among electric vehicles released by traditional car companies, there are few models that can compete with Tesla's Model Y or Model 3," adding, "Existing automakers need to focus not just on making electric vehicles, but on offering cars that consumers will prefer."