Korean media: China has shaken the deep friendship between Korean batteries and global vehicle companies

Core tip: On February 28, the Korean media "Global Economy" published an article saying that the tension between Korean battery companies and global auto companies is spreading. Friendships built over the years are falling apart. this

On February 28, the Korean media "Global Economy" published an article saying that the tension between Korean battery companies and global auto companies is spreading. Friendships built over the years are falling apart. This is a bit embarrassing for them who have been strengthening their relationship through product supply and joint venture factories. The rapid growth of Chinese battery companies is the reason behind it.

In the middle of this month, Ford suspended production of its electric pickup truck, the F-150 Lightning, citing a battery fire, according to industry sources. In this regard, Ford explained: "A fire broke out during the quality inspection of the whole vehicle, and the fire spread to the next car. The suspension of vehicle production will continue until next week."

The controversy arose because of Ford's interpretation. Instead of stopping production simply because there was a problem with the vehicle, it concluded that the cause was a "battery fire". It can be seen as a sniping attack on battery companies. The Ford F-150 Lightning will be powered by SK On's NCM9 batteries. It gives the impression that the vehicle caught fire due to quality issues with SK On's batteries, leading to a discontinuation of production.

Also, the situation worsened with the fact that a battery problem came to light last month. The US financial media CNBC reported that Ford replaced parts of some vehicles last month to prevent battery performance from deteriorating. This is the case for more than 100 vehicles. The battery quality problem does not occur once, but occurs many times.

In addition, the news that the previous cooperation between battery and vehicle companies failed or broke up also came out, and the tension among the Korean industry is continuing. A planned joint venture between SK On and Ford in Turkey fell through and a fourth U.S. plant planned by LG Energy Solutions and General Motors has been delayed.

As far as SK On and Ford are concerned, the collaboration didn't last long. It is reported that the discussions between the two parties took place in 2019, when SK On started building an electric vehicle battery factory in Georgia, the United States. The official start of cooperation began with the establishment of the joint venture company Blue Oval SK in July last year. It is reported that LG Energy Solutions and General Motors have maintained a cooperative relationship since 2009 when they exclusively supplied batteries for GM's Chevrolet electric vehicle Bolt EV.

But the atmosphere has changed due to disharmony between battery and vehicle companies. Yesterday it was a "partnership", but today it is a "competitor". In particular, the rise of Chinese battery companies is considered one of the reasons. Chinese companies such as Ningde Times and BYD, which also makes batteries and electric vehicles, have grown significantly in recent years. In the global battery usage ranking released by SNE Research, a specialized energy market research company, there are only 6 Chinese companies in the top ten. This is different from the battery market dominated by South Korea and Japan in the past.

Especially threatening are batteries. The battery produced in China is LFP (lithium, phosphoric acid, iron), which has a shorter driving distance and lower power than NCM (nickel, cobalt, manganese) mainly produced by Korean battery companies, but has high safety and long life. There is also less fire risk. The advantage is that it is cost-effective, which can reduce the price of electric vehicles that have risen in price, and reduce the costs of consumers and vehicle companies.

The cooperation between Ford and CATL is also for this reason. According to Reuters analysis, if Ford and CATL establish a joint venture factory in Michigan, Ford will enjoy battery tax credits and can gain up to 8% in the field of electric vehicles by 2026. Ford Chief Executive Officer (CEO) Jim Farley also said: "The goal of this cooperation is to reduce the production cost of electric vehicles."

There are concerns that even existing collaborations could be threatened. The reason is the same. A typical example is Ford’s decision on the 13th (local time) to build a battery factory in Michigan with China’s CATL, the world’s No. 1 battery manufacturer, before mentioning SK On’s battery issue two days later.

A related person in the Korean auto industry said: "Tesla's price reduction competition is spreading to other brands. In order to reduce the price of electric vehicles, it is necessary to reduce the price of batteries, which account for the largest proportion." LFP batteries produced by battery companies are cheaper than NCM produced by Korean battery companies.”