U.S. electric vehicle battery imports from South Korea surge over 1,300% due to tariffs causing a significant shift away from China.
The first half of 2022 saw a significant change in the US market for energy storage systems (ESS) batteries, with South Korean exports surging and Chinese imports plummeting due to escalating tariff tensions between the US and China.
According to data from global market research firm Mordor Intelligence, the US ESS market is projected to grow from $3.68 billion this year to $5.09 billion by 2030. Amid this growth, US imports of EV batteries from South Korea increased by over 1,300% in the first six months of the year, marking a record volume.
This shift drastically impacted imports from China: US imports of Chinese EV batteries fell sharply by 58% over the same period, with the steepest drop in May 2022 when imports plunged nearly 85%.
Choi Jae-hee, a senior researcher at the Korea Institute for International Economic Policy, stated that the tariff war may reduce imports of Chinese batteries into the United States, potentially benefiting Korean battery firms. The US sought to diversify its EV battery supply amid escalating trade conflicts and tariffs against China, which had previously been the dominant source for these batteries.
LG Energy Solution, a key player in the South Korean battery industry, is currently mass-producing lithium iron phosphate (LFP) batteries for ESS at its Michigan plant and plans to establish 30 gigawatt-hours of local capacity by 2026. The company signed a $4.3 billion battery contract with a suspected buyer, Tesla, marking its biggest ESS deal and exceeding all Chinese competitors in the US market.
To capitalize on the space left by the exclusion of Chinese competitors, Korean companies must strengthen their competitiveness, particularly in LFP technologies, which are widely used in ESS applications. Samsung SDI plans to begin local production of ESS cells in the fourth quarter by utilizing part of its production lines at the Indiana plant. SK On plans to convert some lines at U.S. facilities to manufacture ESS-dedicated LFP batteries and is currently negotiating gigawatt-scale supply contracts with multiple U.S. customers.
The combined U.S. battery production capacity of the three Korean firms (LG Energy Solution, Samsung SDI, SK On) is expected to reach 600 gigawatt-hours, enough to power approximately 7.5 million high-performance EVs. Korea's share of U.S. EV battery imports surged from 0.73% a year ago to 13.1%, while Chinese imports of ESS batteries also grew 23% over the same period, but China's share declined to 67% from 69%.
In June, U.S. imports of Korean storage batteries reached a record $243 million, while Chinese imports of $441 million were the lowest since April 2022. This trend suggests that the US market for ESS batteries is shifting towards South Korea, a change that could have significant implications for the global battery industry.
- As the US market for energy storage systems (ESS) batteries grows, the finance sector is anticipated to play a crucial role in supporting the expansion of South Korean battery firms, such as LG Energy Solution, Samsung SDI, and SK On, as they aim to establish local production capacity to capitalize on the space left by Chinese competitors.
- In the realm of technology, the focus is shifting from China to South Korea in the US market for ESS batteries, particularly in the realm of lithium iron phosphate (LFP) technologies, as Korean companies, like LG Energy Solution and SK On, are mass-producing LFP batteries for ESS and negotiating contracts to meet gigawatt-scale demand from US customers.
