South Korea Electric Vehicle Battery Supply Chain: Trends and Drivers

Introduction

South Korea's electric vehicle battery supply chain has entered a consolidation and optimization phase as the automotive manufacturers along with the battery manufacturers feel the rising pressure to secure the long term access to the critical materials while at the same time reducing the exposure to the volatile import markets. The current supply chain structure is thus being reconfigured as a result of the domestic EV penetration targets, battery recycling mandates, and government supported industrial localization programs, rather than being driven mainly by export demand as it was in the earlier growth cycles.

Leading battery producers like LG Energy Solution, Samsung SDI, and SK On are changing the upstream procurement models by going for the integration of recycled materials along with the virgin lithium, nickel, and cobalt inputs. In April 2024, LG Energy Solution announced that it is working closely with the Korean recycling firms in order to use the recycled nickel and cobalt in its domestic EV battery production lines. This step is indicative of a deeper transformation towards the closed-loop sourcing models that are less dependent on overseas mining contracts.

Auto manufacturers like Hyundai Motor Group are asking the battery suppliers to provide the material traceability and the lifecycle compliance as a prerequisite for the vehicle platform sourcing decisions. These demands are affecting the ways in which the tier one suppliers organize the contracts with the recyclers, the precursor producers, and the logistics partners.

For deeper quantitative insights, readers are encouraged to refer to the complete South Korea Battery Recycling Market report and its table of contents.

Major Drivers, Trends and Challenges

The South Korean economy, heavily reliant on exports in a world where global trade regulations are becoming increasingly stringent, has largely contributed to the reshaping of the EV battery supply chain. The European Union Battery Regulation and similar measures in North America now require products to contain a certain percentage of recycled material along with the disclosure of the carbon footprint. Therefore, South Korean suppliers who supply EV markets abroad should not only ensure that their products are recycled but also that they themselves are monitoring their carbon footprints in their domestic supply chains to be able to export their products. Expanding their investments in local precursor manufacturing plants that can accommodate recycled feedstock is one of the measures taken by SK On, in response to this situation. SK On announced supply contracts with local recycling companies to support its new battery plants in South Chungcheong Province in September 2023. These agreements aim to both stabilize material costs and improve compliance readiness.

Another significant trend is vertical integration between recycling companies and battery manufacturers. Korean battery producers are, in a few instances, going beyond merely depending on third party recyclers. They are taking equity stakes in recycling businesses to secure long-term access. Samsung SDI has been extremely active in the scouting process of potential joint ventures that would allow the company to directly recover cathode active materials from the locally produced end of life EV batteries.

Challenges still remain, though. In particular, the availability of end-of-life batteries for electric vehicles (EVs) in South Korea is still very limited, due to the relatively young EV fleet. Consequently, there are short-term supply gaps that limit how much recycled materials can be used. Moreover, the logistics of safe battery transport and the needed infrastructure, although at the initial stages, still require more investment for efficient collection and disassembly processes to take place.

The South Korean EV battery supply chain is expected to become sustainable and more environmentally friendly in the long run. Recycling is forecasted to move from being just a mandatory activity to a strategic sourcing instrument. Firms that have their procurement, recycling, and manufacturing operations tightly integrated will be better equipped to manage price changes and regulatory risks in the global EV markets.

Table of Contents

1. Introduction
2. Definition and Scope
3. EV Battery Supply Chain Structure
4. Automaker Procurement Strategies
5. Recycling Integration Models
6. Material Traceability Requirements
7. Domestic Manufacturing Capacity
8. Challenges and Cost Pressures
9. Outlook and Strategic Opportunities

Related Resources

Electric Vehicle Recycled Battery Materials Market

Electric Vehicle Charging Station Manufacturing Plant Project Report

South Korea Solid-State Battery Market