Korean Cars May Be Only Shells... 90% of Core Battery Materials for Future Vehicles Sourced from China [Future Materials Dependency]

94% of Precursors and 96% of Nickel Hydroxide Sourced from China
Japan and Europe Hold Single-Digit Shares
Concerns Grow Over Delays in Localization Efforts

It has been revealed that the core materials for the future automotive industry are still heavily dependent on overseas sources, particularly China. As the structure of importing most secondary battery materials for electric vehicles from China has become entrenched, concerns are growing over supply chain instability and a decline in industrial competitiveness.

According to data submitted by the office of Assemblyman Lee Jaegwan of the Democratic Party of Korea to the Ministry of Trade, Industry and Energy on October 8, the proportion of imports from China for key materials-such as ternary cathode active materials, precursors, lithium hydroxide, nickel hydroxide, and graphite-has been overwhelmingly high over the past five years. The data shows the annual share of major import countries by item, with China occupying an absolute position in most cases.

Ternary cathode active material is a key component that determines battery performance. However, the import structure is excessively skewed toward China. In 2020, 73.4% of imports came from China, rising to 86.6% in 2022. Last year, 82.8% was sourced from China, and this year the figure remains high at 75.7%. Japan’s share fell from 17.3% in 2020 to 9.6% this year, while Hungary and the United States supplied small amounts, but these did not alter the structural imbalance.

The situation is even more serious for precursors. China’s share was 89.1% in 2020 and soared to 96.5% in 2023. This year, it stands at 94.1%, indicating near-total reliance on China. Japan and Finland each account for 2-3%, but this is not enough to affect the overall trend.

Lithium hydroxide is an essential material used as a cathode in electric vehicle batteries. As of 2024, China’s share reached 82.7%. Chile accounted for 13.2% and the United States 2.1%, but these remain supplementary sources. Russia previously supplied 4-5%, but its share has virtually disappeared in recent years.

Kia EV concept car 'HabaNiro'. Kia

The concentration is even more pronounced for nickel hydroxide. Until 2021, there were various sources such as Canada (24.2%) and Thailand (14.9%), but China has since regained dominance. Since 2022, China’s share has reached 99%, rising to 99.6% last year and 96.4% this year. This structure effectively gives one country a monopoly.

For cobalt oxide, China’s share decreased somewhat from 88.5% in 2020 but still stands at 75.8% this year. Belgium and Finland supply some, but only at the 5-17% level. For manganese dioxide, the shares of Japan and South Africa have increased, lowering China’s share to the 60-70% range, but the structure remains centered on China.

The dependence on China is extreme for graphite. For natural graphite, more than 95% has been sourced from China for the past five years, reaching 97.6% this year. For synthetic graphite, the share rose from 89.4% in 2020 to 98.8% this year. Switzerland, Japan, and Canada supply small amounts, but these have not affected the market landscape.

Another core battery material, separators, has also seen deepening dependence on China. The share of Chinese imports increased from 61.4% in 2020 to 78.0% in 2023, and stands at 73.7% this year. Japan and Indonesia have made some contributions, but together account for less than 20%.

This data clearly shows that the supply chain for core materials in the future automotive sector is excessively concentrated in a single country, especially China. From raw materials to processed materials, China controls the entire value chain, significantly limiting the autonomy of the domestic industry.

An industry official stated, "The competitiveness of the future automotive industry comes from batteries, and relying on a single country for materials is the greatest risk." He added, "If there is a disruption in supply from China, the entire domestic industry could be shaken." He emphasized, "The government and companies must expand strategic investments to increase the localization rate and diversify the supply chain."

The government is pursuing research and development investment and cooperation to secure overseas resources in order to increase the localization rate. However, with China already dominating the value chain from raw material mining to processing, it is not easy to achieve results in the short term.