LG Chem says it has Won150tn ($125bn) worth of orders that will keep it busy for the next five years and help the world’s largest electric vehicle battery maker ride out the coronavirus pandemic.
The South Korean company, which controls about a quarter of the global market, is boosting capacity to meet a surge in orders driven by tighter environmental regulations in Europe and China. Its strong performance has helped it overtake China’s CATL to become the industry leader this year.
“We have survived the pandemic relatively unscathed as demand for our products has continued to increase despite lockdowns,” said Shin Hak-cheol, the company’s chief executive. “We need to expand our capacity to fulfil the backlog of orders.”
Although global EV battery sales fell 24 per cent in the first five months of the year owing to the pandemic, LG Chem’s sales jumped 70 per cent on the back of popular EV models including Tesla’s Model 3, Renault’s Zoe, and Audi’s E-tron, according to market tracker SNE Research.
LG Chem’s market share has ballooned from 10.8 per cent last year to 24.2 per cent this year, putting it ahead of CATL with 22.3 per cent and Panasonic with 21.4 per cent. Its share price has more than doubled over the past four months to near a 10-year high.
Mr Shin expects the global electric vehicle market to grow around 35 per cent a year with its share of the world’s auto market increasing from 2.8 per cent last year to as much as 15 per cent by 2024.
“The rapid growth of the EV market will continue,” said Mr Shin, “driven by stiffer environmental regulations in Europe and China”, which together account for more than 70 per cent of the global EV market.
While the virus outbreak has forced LG Chem to cut capital expenditure by 9 per cent this year to about Won6tn, it plans to push up capex next year and channel about 60 per cent of that increased amount into the battery business.
This year, the company plans to spend a record Won1.3tn — about 4 per cent of sales — on research and development, with about 40 per cent of that on EV batteries.
LG Chem credits a localised supply chain for helping it prosper despite the pandemic. In addition to its domestic facility, it has plants in China, Poland and Michigan in the US, where it is also building a plant in Ohio to supply GM.
“Our regional manufacturing hubs have played a big role at a time like this. We have seen few work stoppages and have had a good supply of raw materials,” said Mr Shin.
LG Chem, which has a joint venture with Chinese carmaker Geely, also started supplying batteries to Tesla’s new Shanghai factory this year after Beijing allowed electric cars using foreign-made batteries to receive Chinese subsidies for the first time since 2015.
Chinese rivals have larger volume and lower prices, “but we are still ahead of them in terms of technology, by at least a year or two”, said Mr Shin. “Technology development is our life blood. We will continue to increase our R&D spending for technology differentiation.”