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LG Energy reaches for EV battery crown with record $10bn IPO
South Korean company boosts output in 6 countries, with eye on China's CATL
LG Energy Solution ranks a close second in global EV battery market share, behind China's CATL. (Photo courtesy of LG Energy Solution)
KOTARO HOSOKAWA and TAKASHI KAWAKAMI, Nikkei staff writersJanuary 20, 2022 12:44 JST
SEOUL/GUANGZHOU -- South Korea's LG Energy Solution has its sights on taking the EV battery crown from China's CATL, with plans to expand production in six countries and to develop cutting-edge power cells with the proceeds of its potentially record-breaking stock market debut.
LG Energy and parent LG Chem aim to raise 12.75 trillion won ($10.7 billion) through the former's initial public offering on Jan. 27 -- more than double the current record in South Korea of 4.9 trillion won held by Samsung Life Insurance in 2010.
If successful, this would give LG Energy a valuation of around 70 trillion won, putting it behind only Samsung Electronics and SK Hynix on the Korea Exchange.
The supersized IPO by the world's second-largest maker of electric-vehicle batteries has whipped up a frenzy in South Korea. Bids from institutional investors outpaced the supply of shares by more than 2,000 to 1. With demand for EV batteries poised to surge, some market watchers believe LG Energy's market cap is on track to reach the 200 trillion won mark.
At an event on Jan. 10, CEO Kwon Young-soo said the company will increase its battery production capacity 2.6 times over three years to 400 gigawatt-hours.
In just the three months to the end of December, the company's outstanding orders jumped to 250 trillion won from 160 trillion won at the end of June. LG Energy supplies batteries to automakers such as Volkswagen, Tesla and Audi, as well as the alliance of Renault, Nissan Motor and Mitsubishi Motors. While these contracts are believed to be long-term, the company still needs to lift capacity to deliver on its commitments.
Expansion plans are already underway in six countries. LG Energy will invest 5.6 trillion won in a joint factory with General Motors in the U.S., as well as 1.4 trillion won in its own plant in Poland, 1.2 trillion won in China, and 645 billion won in South Korea. It is also building a joint plant with Stellantis in Canada and Hyundai Motor in Indonesia. Part of the proceeds from the IPO will go toward these large-scale investments.
In addition, LG Energy is working on a cutting-edge solid-state battery. It is also developing a lightweight lithium-sulfur battery that could be used in drones and flying taxis.
The race for the lead in EV battery market share is tight. CATL, or Contemporary Amperex Technology Co., Ltd., was the top player in 2020 at 25.3%, according to Tokyo-based Techno Systems Research. LG Energy followed at 22.7%.
"When you look at materials technology and intellectual property, we are ahead" of CATL, Kwon said. He was bullish that orders will grow as automakers in the Europe and the U.S. embrace EVs
Kwon sees CATL's higher dependence on Chinese customers as a weakness. "We have the lead when it comes to securing global clients based in Europe and the U.S., which will increase our market share in the future," he said.
CATL's international customers includes Tesla, BMW, Toyota Motor and Honda Motor, but the company still generates 80% of its revenue in China.
CATL will open a plant in Europe this year in an attempt to diversify geographically. But with the U.S. and China at odds with each other, "it will be difficult for CATL to build deep relationships, such as joint ventures, with Western companies," said a securities analyst.
LG Energy faces its own challenges. Massive recalls in 2020 and 2021 have resulted in red ink. Because battery systems account for about 30% of an EV's cost, the expenses for replacing them can snowball.
Quality control will be an constant concern for the multinational production expansion. LG Energy has joined hands with German industrial conglomerate Siemens to turn its plants into smart factories. Battery quality will be checked by production technology that uses artificial intelligence applications and big data-driven machine learning.
Parent company LG Chem's own growth strategy will be put to the test after the IPO, which will leave it with an 82% stake in LG Energy. LG Chem's market cap now stands at 46 trillion won -- well below the value of its stake in LG Energy -- making it vital for the company to map out a path beyond batteries.
LG Energy's stock market debut will usher in heavier competition for share in the EV battery market.
CATL expects to have over 670 gigawatt-hours of production capacity in 2025, putting it above LG Energy's planned 400 GWh. CATL said in a filing on Sunday that it needs to add 430 GWh of capacity. CATL estimates it will spend at least 300 million yuan ($47 million) for each extra gigawatt-hour of capacity.
https://asia.nikkei.com/Business/Te...hes-for-EV-battery-crown-with-record-10bn-IPO
South Korean company boosts output in 6 countries, with eye on China's CATL
LG Energy Solution ranks a close second in global EV battery market share, behind China's CATL. (Photo courtesy of LG Energy Solution)
KOTARO HOSOKAWA and TAKASHI KAWAKAMI, Nikkei staff writersJanuary 20, 2022 12:44 JST
SEOUL/GUANGZHOU -- South Korea's LG Energy Solution has its sights on taking the EV battery crown from China's CATL, with plans to expand production in six countries and to develop cutting-edge power cells with the proceeds of its potentially record-breaking stock market debut.
LG Energy and parent LG Chem aim to raise 12.75 trillion won ($10.7 billion) through the former's initial public offering on Jan. 27 -- more than double the current record in South Korea of 4.9 trillion won held by Samsung Life Insurance in 2010.
If successful, this would give LG Energy a valuation of around 70 trillion won, putting it behind only Samsung Electronics and SK Hynix on the Korea Exchange.
The supersized IPO by the world's second-largest maker of electric-vehicle batteries has whipped up a frenzy in South Korea. Bids from institutional investors outpaced the supply of shares by more than 2,000 to 1. With demand for EV batteries poised to surge, some market watchers believe LG Energy's market cap is on track to reach the 200 trillion won mark.
At an event on Jan. 10, CEO Kwon Young-soo said the company will increase its battery production capacity 2.6 times over three years to 400 gigawatt-hours.
In just the three months to the end of December, the company's outstanding orders jumped to 250 trillion won from 160 trillion won at the end of June. LG Energy supplies batteries to automakers such as Volkswagen, Tesla and Audi, as well as the alliance of Renault, Nissan Motor and Mitsubishi Motors. While these contracts are believed to be long-term, the company still needs to lift capacity to deliver on its commitments.
Expansion plans are already underway in six countries. LG Energy will invest 5.6 trillion won in a joint factory with General Motors in the U.S., as well as 1.4 trillion won in its own plant in Poland, 1.2 trillion won in China, and 645 billion won in South Korea. It is also building a joint plant with Stellantis in Canada and Hyundai Motor in Indonesia. Part of the proceeds from the IPO will go toward these large-scale investments.
In addition, LG Energy is working on a cutting-edge solid-state battery. It is also developing a lightweight lithium-sulfur battery that could be used in drones and flying taxis.
The race for the lead in EV battery market share is tight. CATL, or Contemporary Amperex Technology Co., Ltd., was the top player in 2020 at 25.3%, according to Tokyo-based Techno Systems Research. LG Energy followed at 22.7%.
"When you look at materials technology and intellectual property, we are ahead" of CATL, Kwon said. He was bullish that orders will grow as automakers in the Europe and the U.S. embrace EVs
Kwon sees CATL's higher dependence on Chinese customers as a weakness. "We have the lead when it comes to securing global clients based in Europe and the U.S., which will increase our market share in the future," he said.
CATL's international customers includes Tesla, BMW, Toyota Motor and Honda Motor, but the company still generates 80% of its revenue in China.
CATL will open a plant in Europe this year in an attempt to diversify geographically. But with the U.S. and China at odds with each other, "it will be difficult for CATL to build deep relationships, such as joint ventures, with Western companies," said a securities analyst.
LG Energy faces its own challenges. Massive recalls in 2020 and 2021 have resulted in red ink. Because battery systems account for about 30% of an EV's cost, the expenses for replacing them can snowball.
Quality control will be an constant concern for the multinational production expansion. LG Energy has joined hands with German industrial conglomerate Siemens to turn its plants into smart factories. Battery quality will be checked by production technology that uses artificial intelligence applications and big data-driven machine learning.
Parent company LG Chem's own growth strategy will be put to the test after the IPO, which will leave it with an 82% stake in LG Energy. LG Chem's market cap now stands at 46 trillion won -- well below the value of its stake in LG Energy -- making it vital for the company to map out a path beyond batteries.
LG Energy's stock market debut will usher in heavier competition for share in the EV battery market.
CATL expects to have over 670 gigawatt-hours of production capacity in 2025, putting it above LG Energy's planned 400 GWh. CATL said in a filing on Sunday that it needs to add 430 GWh of capacity. CATL estimates it will spend at least 300 million yuan ($47 million) for each extra gigawatt-hour of capacity.
https://asia.nikkei.com/Business/Te...hes-for-EV-battery-crown-with-record-10bn-IPO
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