BriefCASE: South Korean companies eye low-cost LFP battery market

Intensifying competition and slowing demand for battery-electric vehicles are pressuring carmakers to lower manufacturing costs. The lithium iron phosphate (LFP) battery technology is emerging as a key step in cost control, with almost all major global automakers looking to integrate the battery chemistry into their product portfolios.

While mainland Chinese companies such as Contemporary Amperex Technology Co. Ltd. (CATL) and BYD continue to dominate the LFP battery manufacturing ecosystem, US and European legacy carmakers are now looking to build local LFP battery supply chains to cut battery costs by 30%-40%. This vendor diversification strategy is expected to create opportunities for South Korean battery companies such as LG Energy Solution (LGES), SK On and Samsung SDI to increase their stake in the LFP market. Pushed by new market dynamics, South Korean battery-makers, known for their expertise in nickel-based lithium batteries, are accelerating the development of LFP technology. This is also fueled by the expiry of core LFP patents in 2022, allowing LFP battery production outside of mainland China.

Renault picks LG Energy, CATL to build LFP ecosystem in Europe

In July, Renault announced the battery strategy for its EV business, Ampere. The company signed deals with LGES and CATL to build an LFP battery value chain in Europe. Ampere's plan entails integrating LFP technology in parent Renault's existing battery strategy, which was heavily reliant on using the nickel cobalt manganese or NCM chemistry.

LGES and CATL are assigned to provide Ampere with the LFP batteries that will power several EV models from the Renault and Alpine brands until 2030. CATL will supply LFP batteries to Ampere from its Hungary-based plant and LGES will supply NCM and LFP batteries from its Poland-based facility. The first Renault models with LFP technology are scheduled to launch in early 2026.

LGES signed a five-year contract with Renault to supply LFP batteries to Ampere from late 2025 through 2030, with a total capacity of approximately 39 GWh to power about 590,000 BEVs. The deal is LGES' first large-scale supply deal for LFP batteries and could indicate that South Korean battery companies are a suitable alternative to their Chinese counterparts for LFP batteries.

LGES claims that it will offer a competitive price for its LFP batteries. According to the company, the price advantage in LFP will also come from implementing the cell-to-pack strategy in the manufacturing process. Although CATL and BYD offer LFP batteries in cell-to-pack design, LGES claims to be the first to apply the technology to pouch-type batteries. Renault said the integration of LFP and cell-to-pack technologies will enable Ampere to reduce the cost of batteries by about 20% in its vehicles starting in 2026.

Samsung SDI and SK On target mass production in 2026

SK On is reportedly in different stages of discussions with its customers for the supply of LFP batteries. SK On's Chief Executive Lee Seok-Hee told The Korea Times in March that the company internally wrapped up the process of developing LFP batteries and is now looking to mass produce them as early as 2026. At the InterBattery 2024 conference in March, SK On displayed its Winter Pro LFP Battery, which has 19% more energy density than regular LFP batteries and has significantly improved charging and discharging capacity.

Samsung SDI, which disclosed its plan to start developing LFP batteries on the sidelines of its fourth-quarter 2023 earnings call, unveiled a prototype LFP battery at the same conference. Sharing its business outlook for the second half of 2024, the company said in July that it plans to set up a dedicated pilot production line for LFP batteries at an undisclosed site in South Korea, with a target to mass produce these batteries in 2026.

Business opportunity for South Koreans

"According to the battery price model at S&P Global Mobility, the price of LFP batteries in China has reached $52 per kWh in 2024, which is approximately 25% lower than the price of NCM811 batteries. This significant reduction has enabled price parity between BEVs and internal combustion engine vehicles in China, marking a major milestone in the e-mobility transition," said Ali Adim, manager, technical research at S&P Global Mobility. "In contrast, North America and Europe, which lack access to such economical batteries, are struggling to sell their EVs. Consequently, South Korean battery manufacturers have been compelled to adopt LFP chemistry to avoid losing market share."

Despite the gap between Chinese and Korean suppliers in LFP production expertise and supply chain management, there is a compelling business case for Korean manufacturers in Europe and North America, largely due to their strong relationships with carmakers in these regions, Adim added.

Authored by: Amit Panday, Senior Research Analyst, Supply Chain & Technology, S&P Global Mobility

By subscribing to AutoTechInsight, you can quickly gain intel on market developments and technology trends, dive into granular forecasts, and seamlessly drive analytics to support challenging decision-making.

Learn more and subscribe.