Author: Kenvin

Introduction

In the battle of batteries among China, Japan, and South Korea, South Korean batteries have fallen behind due to several cases of combustion and huge compensation amounts, which may temporarily salvage the brand, but in order to continue to be one of the top three battery makers, they must focus on quality, catch up in lithium iron phosphate technology, and make efforts in cutting-edge technologies such as solid-state batteries.

Recently, LG batteries reached a settlement agreement with General Motors in the US market, agreeing to recall and pay for the repair and replacement of battery packs for subsequent vehicles due to a series of battery quality issues, and pay high compensation. Following its compensation to Hyundai and Kia due to battery quality problems, LG batteries again compensated for external battery quality issues.

LG batteries have lost their leading share in the global market this year, being overtaken once again by Contemporary Amperex Technology, while facing many upstart companies in the Chinese market, LG batteries have no advantages to speak of, lacking in lithium iron phosphate batteries and becoming a weakness.

Never-ending Combustions and Compensation

On October 13th, General Motors announced that it had reached an agreement with South Korean LG batteries on compensation matters. LG batteries will pay USD 1.9 billion to General Motors, which will be used to recall and repair Chevrolet Bolt electric vehicles due to the potential fire hazard caused by faulty LG batteries. This is the third time General Motors has recalled this model, including all Bolt EV and EUV models produced since 2017. The battery fault has caused at least 13 car fires so far.

Shilpan Amin, GM’s Vice President of Global Purchasing and Supply Chain, stated, “LG batteries are a supplier that General Motors respects very much, and we are pleased to reach this settlement agreement. Our engineering and manufacturing teams will continue to work together to accelerate production of new battery modules, and we expect to begin servicing our customers’ vehicles later this month.”

This means that after a long struggle between LG batteries and General Motors, the conflict has been settled with LG batteries paying a high compensation fee. General Motors undoubtedly pushed most of the responsibility for the combustion incidents of Bolt EV to LG batteries, making them bear the vast majority of the subsequent recall and repair costs.The recall is not the first time that LG batteries have been recalled due to battery quality issues. On March 8th of this year, Hyundai Motor recalled 81,700 pure electric vehicles worldwide due to the risk of fire, and the cost of the recall was as high as 1 trillion won (approximately $889 million). LG Chemical, the battery supplier for the recalled model, will bear 70% of the recall cost.

Data shows that since 2018, there have been 15 incidents of fire in Hyundai Kona electric vehicles, and the investigation results show that the battery fire is not a software problem. There is suspicion that there is a manufacturing defect in the battery, which may catch fire at any time. For safety reasons, the problem can only be solved by recalling and replacing the battery pack.

With each recall, LG batteries have borne the major responsibility for accidents, paying high recall costs, which has further affected the original cooperative manufacturer’s confidence in LG batteries and the willingness of other automakers to order them. In addition, the cumulative number of fires in Hyundai and General Motors vehicles is close to 30 times, making LG batteries the brand with the highest number of fires in the world. For consumers, who dares to choose LG batteries?

At the same time, we also see that the resolution of the two recall events of LG batteries may provide a certain reference significance for the division of responsibilities between battery suppliers and original equipment manufacturers in the future, as the number of electric vehicles, even electric bicycles and electric motorcycles, that catch fire after accidents continues to increase in China.

That is to say, first, a neutral and authoritative organization needs to monitor the accident vehicles to determine whether the cause of the fire that caused the accident is a manufacturer’s battery management system (BMS) software problem, or a problem with battery manufacturing processes, chemical composition of battery cells, etc. Previously, as more and more new energy vehicles appeared, the occurrence of electric vehicle fires was not uncommon, but there was no clear specification for the attribution of responsibility after accidents.

The frequent self-ignition incidents of the domestic Euler iQ model led to the manufacturer Great Wall Motor having to issue a statement to recall the problematic batches of Euler iQ models. However, in the end, the owners of Euler iQ revealed that the manufacturer did not solve the problem by recalling and replacing the battery pack like General Motors and Hyundai Motor, but only by upgrading the BMS software through a home visit. Even more surprising is that the manufacturer locked the available capacity of the battery pack and reduced it after upgrading the software in order to reduce the risk of fire.

After releasing the recall statement, the battery supplier for the Euler iQ model, Funeng Technology, acknowledged that there were “matching differences between some power battery modules and BMS software control strategies” but also stated that the company only supplied the module used in the recalled Euler iQ model and that “the BMS is not our product or supply”. In other words, Funeng Technology did not admit to being the main responsible party for the fires of the iQ model, and the recall solution proposed by the Euler manufacturer confirms that Funeng Technology did not take responsibility.

Recall Due to Battery Safety Issues by NIO in 2019

NIO, a Chinese electric vehicle company, had a recall in 2019 due to battery safety issues. On June 27, 2019, NIO announced the recall of 4803 ES8 electric vehicles that were produced between April 2, 2018 and October 19, 2018 that had power battery packs. NIO’s battery supplier, CATL, explained the reason for the recall, stating that “due to the interference between the battery box and the module structure supplied by CATL, there is a risk of low voltage sampling wire harness short-circuit under some extreme conditions, which poses safety hazards.” Although the recall resolved the combustion risk of the ES8, the division of responsibilities between NIO and CATL remained unknown to the public.

Poor Performance in the Chinese Market

The $1.9 billion settlement that LG paid to General Motors can be regarded as both the responsibility and the concession of the supplier. By conceding, they took the initiative to bear the responsibility under public criticism, and perhaps gained public understanding in return; most importantly, they did not want to completely fall out with major customers like GM.

According to market research data, LG Energy Solutions, which was spun off from LG Chemical’s battery business and officially established on December 1, 2020, held a 24.5% market share in the first eight months of 2021, lagging behind CATL by 5.8%. CATL has a global market share of 30.3%, significantly higher than other manufacturers. Panasonic is the third-largest manufacturer with an 11.1% market share in the first eight months, followed by BYD with a 10% market share. SK and Samsung SDI, ranking fifth and sixth respectively, had a market share of only 5.5% and 3.4% in the first eight months of this year, obviously lagging behind other manufacturers.

Meanwhile, in the Chinese market, LG Energy’s battery installation volume ranked only fourth, behind CATL, BYD, and CALB. Their domestic market share is only 5.5%, which is about one-ninth of CATL’s.LG Energy and CATL are both battery suppliers for Tesla’s Shanghai factory. In September, the total domestic sales of Model 3 and Model Y reached an astonishing 52,153 units, and the most popular ones are the standard range versions equipped with CATL’s lithium iron phosphate batteries. However, LG’s long-range and performance versions with nickel-cobalt-manganese batteries lack the cost-effectiveness compared to the standard range ones, leading to LG Energy’s loss of market share in China to CATL. Therefore, LG Energy has started to develop its own lithium iron phosphate batteries with higher cost-effectiveness, and is also hoping to manufacture Tesla’s next-generation 4680 batteries in China. This may become LG Energy’s killer to win back its market share.

In addition to facing the quick rise of CATL, LG Energy also faces fierce competition from other battery rookies, such as BYD, CALB, Gotion High-Tech, and SVOLT. Currently, LG Chem is promoting a battery joint venture project with GM and Geely, and hopes to establish cooperation with more automakers to expand the production scale of electric vehicle batteries. LG currently has two electric vehicle battery factories in Nanjing, China.

On October 15, SAIC-GM-Wuling’s Ultium plant officially commenced production in Shanghai’s Pudong New District, which is General Motors’ third-generation global pure electric platform developed from the integration of global resources. The first model under this platform, the Cadillac LYRIQ, is expected to be unveiled in the near future and will be launched in the Chinese market next year. With LG Energy’s established cooperation with General Motors, it is believed that General Motors’ brand electrification in China will also use LG Energy’s batteries, which is undoubtedly good news for LG Energy to win its market share. However, judging from General Motors’ underperformance in the domestic market, it is not optimistic about how much market share LG’s batteries can take.

This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.