South Korea's LG Energy aims to wrest the crown of electric vehicle batteries from China's CATL, plans to expand production capacity in six countries and use its potentially record-breaking stock market debut to develop cutting-edge power batteries, the Nikkei reported.
LG Energy and parent company LG Chem aim to raise 12.75 trillion won ($10.7 billion) through the former's Jan. 27 IPO. That's more than double the current record of 4.9 trillion won held by Samsung Life in South Korea in 2010. If successful, this would give LG Energy a valuation of about 70 trillion won.
The mega-IPO of the world's second-largest maker of electric vehicle batteries has set off a frenzy in South Korea. Institutional investors outbid the stock supply by 2,000 to 1. As demand for electric vehicle batteries surges, some observers believe LG Energy's market value is on track to hit the 200 trillion won mark.
At an event on Jan. 10, LG Energy CEO Kwon Young-soo said the company would increase its battery capacity by 2.6 times to 400 GWh within three years.
The company's backlog jumped to 250 trillion won in the three months to the end of December, from 160 trillion won at the end of June. Currently, LG Energy supplies batteries to automakers such as Volkswagen, Tesla and Audi, as well as an alliance of three, Renault, Nissan and Mitsubishi Motors. Although the contracts are considered long-term, the company still needs to ramp up production capacity to deliver on the promise.
Specifically, expansion plans are already underway in six countries. LG Energy will invest 5.6 trillion won to build a joint venture factory with General Motors in the United States, 1.4 trillion won to build its own factory in Poland, 1.2 trillion won in China and 64.5 billion won in South Korea. In addition, it will build joint factories with Stellantis in Canada and Hyundai Motor in Indonesia. Obviously, some of the proceeds from LG Energy's IPO will be used for these massive investments.
Meanwhile, LG Energy is working on a cutting-edge solid-state battery, as well as developing a lightweight lithium-sulfur battery that could be used in drones and flying taxis.
The competition for EV battery market share is fierce. According to Tokyo-based Techno Systems Research, CATL is No. 1 globally with a 25.3 percent share in 2020. LG Energy is close behind with a market share of 22.7%.
"We are ahead of CATL in terms of material technology and intellectual property," Kwon said. As European and U.S. automakers switch to electric vehicles, their orders will continue to grow. Kwon sees CATL's high reliance on Chinese customers as a weakness. "We are leading the way in reaching global customers in Europe and the US."
Although it has international customers such as Tesla, BMW, Toyota and Honda, CATL still generates 80% of its revenue from China. This year, CATL will open a factory in Europe to diversify geographically. But because of differences between China and the United States, "it is difficult for CATL to build deep relationships with Western companies, such as joint ventures," said a securities analyst.
