Global Electric Vehicle Demand Declines, Korean Battery Giants' Capacity Utilization Plunges
On January 2nd, Business Korea published a post stating that due to the decline in global electric vehicle demand, the factory utilization rates of LG Energy Solution, Samsung SDI, and SK On, the three major South Korean battery companies, have significantly decreased, with companies adopting strategies to address market challenges.
According to an industry report on December 30th, LG Energy Solution's average factory utilization rate for the third quarter of this year was 60%, a significant drop from 73% in the same period last year; SK On's decline was even greater, with utilization rates plummeting from 95% last year to a historical low of 46%; Samsung SDI only disclosed the utilization rate for small batteries, which also decreased by 9 percentage points to 68%.
The main reason for the battery production being lower than factory capacity is the slow recovery of electric vehicle demand, which has exacerbated the burden of fixed costs such as labor, worsening the profitability of factories.
SNE Research data shows that global electric vehicle sales (including plug-in hybrids) for major customers represented by Tesla from January to October 2024 were 1.425 million units, a decrease of 1.1% year-on-year, while Hyundai and Kia's electric vehicle sales also decreased by 3.4% during the same period, to 455,000 units.
Additionally, from January to October 2024, the global market share of the three major South Korean battery companies plummeted from 31.7% in 2021 to 20.1%. Meanwhile, Chinese companies like CATL and BYD, benefiting from government support, a strong domestic market, and the cost advantages of low-cost lithium iron phosphate batteries, saw their market share climb from 39.7% to 53.6%.
In response to the challenges, the South Korean battery industry has initiated emergency management mechanisms and is actively seeking countermeasures. SK On has been in emergency management mode since July 2024, freezing all executive salaries until profitability is restored, and has implemented its first-ever voluntary retirement since its establishment; LG Energy Solution has also controlled personnel expansion to the greatest extent; Samsung SDI appointed Choi Joo-Hyun, the former president of Samsung Display, as the new head in November 2024, signaling a management reform.
