South Korea ‘battery alliance’ aims to supercharge rechargeable industry, but can it catch China?

South Korea has unveiled an ambitious strategy to drastically narrow the gap between itself and China in the realm of rechargeable batteries.

Key components of the plan, announced on Tuesday, include launching a “battery alliance” between South Korea’s public and private sectors, while providing various policy measures to consolidate a US$35 billion domestic investment in the industry by 2030.

The Ministry of Trade, Industry and Energy, which announced the “Rechargeable Battery Industry Innovation Strategy”, said in a statement that it intends for South Korea to increase its global market share of rechargeable batteries from its current 25 per cent to 40 per cent by 2030.

If realised, South Korea could make significant gains on current industry leader China, which the strategy says takes up 56.4 per cent of the global market share.

The Korean government considers rechargeable batteries among the key industries that the country’s future economic growth will rely on.

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The new strategy has three main goals: securing a stable supply chain in response to global trade regulations and mineral-supply risks; achieving cutting-edge original technology; and cultivating a solid domestic rechargeable-battery ecosystem.

A key means to secure a stable supply chain will be the formation of the so-called battery alliance.

The alliance includes companies involved in each step of the supply chain. Thus, it not only includes the three big names in South Korea’s rechargeable battery industry – LG Energy Solution, SK On, Samsung SDI – but also companies in the material and refining/smelting industries, which will all cooperate with public institutions.

As part of the alliance, the Korea Trade Insurance Corporation and the Export-Import Bank of Korea have agreed to provide loans and guarantees worth 3 trillion won (US$2.1 billion) over the next five years.

“With the [US Inflation Reduction Act], there is bound to be a limitation in terms of individual companies responding respectively,” the government statement said.

US President Joe Biden signed the US$430 billion Inflation Reduction Act into law in August, which includes state aid for certain industries such as the car sector.

According to the US act, electric-vehicle tax credits will be granted only for batteries that use more than a certain percentage of minerals mined or processed in the US or US free-trade agreement countries.

“Therefore, by launching the battery alliance, we plan to systematically respond [to various challenges] by forming a ‘Korea-team’ that brings together the capabilities of both the public and private sector in terms of securing core mineral components,” the South Korean statement said.

Other plans that will be implemented to achieve the 2030 goal include training more than 16,000 related personnel over the next eight years, by establishing an academy with a curriculum developed by the Korea Battery Industry Association and the three leading battery companies.

Major domestic companies and nine universities, including Seoul National University and Korea University, will jointly provide various battery-related training curriculums that will facilitate employment for students at the companies.

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“Although there are growing uncertainties in the industry due to the reorganisation of domestic supply chains in major countries, this current crisis can, in fact, be an opportunity for new growth,” said Lee Chang-yang, South Korea’s minister of trade, industry and energy.

Lee added that now is the time when a joint public-private strategic response is more important than ever.

In the first half of 2022, 90 per cent of the global rechargeable battery market share was taken up by China, South Korea and Japan, which held 56.4, 25.8 and 9.6 per cent, respectively, according to the government statement.

It added that China’s leading global market share is based on its huge domestic rechargeable battery market, which accounts for 55 per cent of the global market.

In non-Chinese markets, South Korean companies already hold 54.1 per cent of the market share, it said.