Hyundai Motor has unveiled its battery self-production plan, marking a significant step into in-house electric vehicle (EV) battery manufacturing. With several automakers, including Tesla, attempting to produce their own batteries with limited success, industry observers will closely watch Hyundai's ability to navigate this complex venture as it charts its own course.
The EV surge that began in 2021 led to a spike in battery demand, prompting various automakers to invest in their own production capabilities. Tesla, at its Battery Day event, unveiled plans to manufacture its own batteries, while Volkswagen revealed a comprehensive battery production blueprint during its Power Day. Ford, meanwhile, is investing US$185 million to establish a battery development center in the United States.
Hyundai aims to develop a mass-market nickel-cobalt-manganese (NCM) battery by 2030. The company intends to optimize its battery composition by reducing nickel content to lower material costs and enhance energy density by more than 20%.
In an innovative move, Hyundai plans to implement a Cell-to-Vehicle (CTV) design, which integrates the battery with the vehicle body. This strategy aims to reduce the number of components and enhance battery integration. The CTV method is expected to cut battery system weight by 10% compared to the traditional Cell-to-Pack (CTP) approach, offering additional cost-saving benefits.
While Hyundai's plans are promising, the real test lies in its ability to achieve mass production. If the company struggles with yield rates, it may find that sourcing from established battery suppliers is more economically viable.
Conversely, should Hyundai successfully produce its batteries in-house, it could strengthen its negotiating power with battery suppliers. Currently, batteries account for approximately 40% of the total cost of an electric vehicle. If Hyundai can decrease its dependence on external suppliers, it could secure a stronger position for future price negotiations.
This self-production initiative could not only enhance Hyundai's profitability but also provide more flexibility to lower EV prices, giving it a competitive edge in an increasingly crowded market.
Hyundai's influence in the EV sector is growing. According to SNE Research, Hyundai Motor Group sold 313,000 EVs between January and July 2024, securing the seventh position in global EV sales.
However, the prospect of Hyundai fulfilling all its battery needs through self-production poses challenges for battery suppliers. So far, Hyundai has only outlined its production plans and has yet to match the pace of rivals like Tesla and Volkswagen, suggesting that a significant time investment will be needed to achieve mass production.
Industry analysts from ZDNet Korea stress that the success of EV battery initiatives hinges not just on development but also achieving reliable mass production. If Hyundai encounters high defect rates during manufacturing, it could undermine factory operations, a challenge Tesla has yet to overcome.
Despite launching its 46800 battery in 2020 and striving for independent production, Tesla has reportedly struggled to boost production yields effectively. As of July 2024, rumors indicated that if Tesla does not achieve substantial results in battery production by the end of the year, it may reconsider its approach to producing the 46800 battery.
Even if Hyundai successfully establishes its battery production, its strategy may involve a blend of in-house manufacturing and procurement. This mixed approach reflects the necessity of managing self-production risks, as solely relying on in-house production would require substantial investment, and achieving flawless battery manufacturing is an immense challenge.
As Hyundai targets mass-market NCM batteries by 2030, industry speculation suggests it may take an additional three to four years to reach full-scale production. The broader impact of Hyundai's battery production plans on the battery industry remains uncertain.
As both Tesla and Volkswagen have pursued self-production initiatives, many South Korean industry experts caution that new entrants in the battery market may find it challenging to meet demand through internal production alone, particularly for high-quality batteries that require partnerships with established suppliers.
In a related development, during its 2024 CEO Investor Day, Hyundai unveiled the "Hyundai Way," a mid-to-long-term investment strategy totaling KRW120.5 trillion (approx. US$90.3 billion). This initiative not only focuses on battery production but also encompasses strategies for next-generation EVs and extended-range electric vehicles (EREVs).
