Disrupting the Industry: Korean Battery Suppliers at Each Other's Throats
While the automotive industry continues cleaning itself up via electrification and moral corporate messaging, most aspects of doing business have remained decently dirty. For all this striving for a utopian society, businesses still don’t like losing money and will go to great lengths to screw over the competition.
South Korean battery suppliers SK Innovation and LG Chem are currently clawing at each other like a couple of mad tigers. SK managed to secure a contract to supply Volkswagen Group with EV batteries, leading to the construction of a $1.7 billion factory in Georgia. LG did not, leading to a lawsuit. Both automakers and analysts are worried the litigation is spinning out of control, and could effectively obliterate their ability to do business in the United States.
Considering there have already been battery supply issues for low-volume EVs, conflict between suppliers has everyone worried about the future. With so many electric models on the horizon, nobody expects demand to go anywhere but up.
LG Chem took SK to court last April, claiming it had been misappropriating trade secrets and may have poached some important staffers to get the deal with VW. Now they’re basically flinging every patent infringement claim they can at each other and actively trying to ban the importation and sale of EV batteries in the United States. According to Reuters, the list of potentially impacted vehicles includes the Audi E-Tron, Kia Niro, Chevy Bolt, Ford’s upcoming electric pickup, Jaguar’s I-Pace, and every EV manufactured by Volkswagen Group in Tennessee.
From Reuters:
“Whoever loses the fight would suffer a fatal blow, unless the two reach a settlement. This will also be a setback for automakers,” said Cho Jae-phil, a professor at Ulsan National Institute of Science and Technology who worked previously at another Korean rival, Samsung SDI.
Ford spokeswoman Jennifer Flake said it was encouraging LGC and SKI to resolve their conflict without litigation and that it believed there was sufficient demand for multiple suppliers.
“We are aware of the issue. As a normal course of action, we have business continuity plans in place to protect our interests,” Flake said in an emailed statement to Reuters.
GM spokesman Patrick Morrissey said the company was aware of the dispute and at this point it did not expect any impact on the production of its Chevy Bolt electric vehicle.
Korea’s SNE Research believes the battery market will grow by 23 percent each year, reaching a value of $167 billion by 2025. That’s more than enough meat for companies to share. Unfortunately, that won’t be an option if one or both of the nation’s largest suppliers lose their cases.
If the U.S. International Trade Commission (ITC) rules in favor of LG Chem on June 5th, then SK International won’t be able to legally supply VW with product in 2022. It may not even bother to finish the factory in Georgia. According to documents obtained by Reuters on Wednesday, the ITC’s investigative staff currently recommends a motion favoring LGC as it is “the most appropriate sanction for Respondents’ (SK) widespread spoliation of evidence.” A final decision should be made in fall of next year, unless the feuding pair can reach a mutually beneficial agreement.
[Image: Sergii Chernov/Shutterstock]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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@65corvair--Agree. Why not be thankful for a Korean battery company and a German car company putting a major amount of manufacturing in the U.S. I am not so worried about the US running out of oil and natural gas. The biggest issue is not supply but pollution in major metropolitan areas. Nuclear power would be the solution to producing more electricity especially since the US has the largest supply of Uranium which we as a country use very little of and export most of our supply. Getting battery technology to where it is smaller, cheaper, and longer range along with more infrastructure to support EVs will take time. Instead of fighting each other we need to count our blessings and work together to utilize our resources which we have been blessed with.
I feel that automakers saying, “We will deliver hundreds of thousands of EV's five years from now!” is cart-before-the-horse talk. Where is the announcement from our domestics that factory lines currently building transmissions and ICE components are going to be transitioned to battery manufacture? This needs to be a parallel component of the plan. VW's new Salzgitter battery plant prevents them from being held economically "hostage" in the future by independent battery manufacturers.