South Korean battery giant LG Energy Solution Ltd. achieved an industrial breakthrough by reaching a supply agreement with Toyota Motor Corp. on Thursday. The deal is important in that the world-class carmaker turned to Korean batteries instead of local alternatives for its electric vehicles (EVs), a strategic sector moving forward. The recent partnership also suggests that Korea now has an unparalleled competitive edge in battery technology, particularly since Japan was a strong player in the lithium-ion battery sector during the early 2000s.

The battery supply deal also represents a breakthrough for LG Energy Solution and Toyota, both of which have suffered mounting pressure from the U.S. Inflation Reduction Act aimed at bringing production back to the United States.

The deal will enable LG Energy Solution to expand its battery business by building a production base dedicated to batteries for the Japanese carmaker, adding to its existing eight factories in the United States. With an overseas sales goal of 3.5 million EVs, Toyota is poised to produce EVs in its Kentucky factory starting in 2025 to become eligible for IRA incentives, such as tax benefits.

This partnership with Toyota would not have been possible without LG Energy Solution’s continuous efforts in research and development since its supply deal with General Motors Co. (GM) in 2009. The Korean battery giant has taken the lead in the sector with 29,000 battery patents and an annual production of 200 gigawatts, and the global market has also been supportive. For example, Ford Motor Co. has recently hit pause on a construction plan for an EV factory that would use the technology from Contemporary Amperex Technology Co., Limited (CATL), a Chinese battery maker. This break is expected to bring more business opportunities to Korean companies.

However, too much optimism can be dangerous, especially given the rapid growth in the Chinese EV market and Chinese battery makers. Japan has stepped up its support to strategic resources, such as chips and batteries, while many other countries have continued to reduce their subsidies for EV makers. Such developments will bring both risks and opportunities to Korean battery manufacturers, and the only key to success under these circumstances will be technological innovation.

LG Energy Solution should avoid complacency and work hard to keep achieving more breakthroughs and next-generation technological advances.

By Editorial Team

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