K-Battery Faces Compound Crisis amid U.S.-China Headwinds and Weakening Industrial Competitivenes

Market Growth Overshadowed by Decline of Korean Firms
Mounting Risks from China’s Production Cuts and Technological Expansion
Industrial Fragility Exposed amid Delayed Technological Transition

South Korea’s secondary battery industry—once hailed as the nation’s next growth engine—is navigating increasingly treacherous terrain. The global electric vehicle (EV) environment surrounding its core business has turned adverse, while Korean battery makers are steadily losing market share to Chinese rivals. Having missed the optimal timing for technological transition, the combination of slowing demand and excessive supply is pushing the industry to a critical inflection point.

Intensifying Price War amid Supply Glut

According to industry sources on October 14, if Korean, Chinese, and Japanese battery manufacturers complete their planned plants on schedule, global total production capacity next year will exceed actual battery demand by more than twofold. Battery producers had projected an average annual EV market growth rate of 30–40%, but the real figure now appears likely to remain in the 10% range. In such an oversupplied market, the only path to survival is to steal competitors’ orders—and China has been doing exactly that. Chinese companies are steadily encroaching upon Korean battery makers’ share in Europe, the key EV market. Long-standing European clients of Samsung SDI, LG Energy Solution, and SK On are reportedly switching to Chinese suppliers.

Korean companies, having entered Europe earlier than Chinese firms, are now seeking to win back customers by diversifying form factors and expanding the share of lithium iron phosphate (LFP) batteries. Efforts are also underway to commercialize next-generation technologies such as high-efficiency 46mm cylindrical batteries and solid-state batteries. However, with much of the market already absorbed by China, most analysts view recovery of market share as unlikely.

The U.S. market presents no less of a challenge. With Chinese manufacturers largely excluded, competition among Korea’s “Big Three” battery makers has intensified. In the first half of this year, U.S. EV sales grew only 1.6% year-on-year, pushing the market into what industry insiders describe as a “bleeding race.” The situation is further complicated by the Trump administration’s decision to terminate the $7,500 EV tax credit program this month, raising the prospect that the U.S. EV market could contract for the first time next year.

Ford CEO Jim Farley warned that under current conditions, the U.S. EV market share could fall to less than half of its current level. Electric vehicles currently account for roughly 10% of total U.S. new car sales, but that figure could slip below 5%. In battery demand terms, this equates to only 100–200 gigawatt hours (GWh) annually. With Korea’s top three battery firms set to expand their U.S. production capacity from 250GWh to nearly 600GWh by next year, concerns about a looming supply glut are mounting.

China’s Battery Sector Restructuring Adds Cost Pressures on Korea

China’s latest decision to restructure its nonferrous metals industry—key raw materials for battery production—is adding to the uncertainty faced by Korean firms. Late last month, the Ministry of Industry and Information Technology (MIIT) unveiled its “2025–2026 Nonferrous Metals Stabilization Plan,” setting an annual output growth target of 1.5% for the country’s top 10 nonferrous metals. This marks a sharp cut from the 5% growth target outlined in its 2023 report for lithium, nickel, cobalt, and copper production.

China dominates global production and smelting of nonferrous metals, accounting for more than half of the world’s output. According to China’s National Bureau of Statistics, production of the 10 major nonferrous metals reached 54.32 million tons between January and August this year, up 3.1% from the same period last year. Yet prices of key battery metals such as lithium and nickel have remained depressed for years amid Chinese-led oversupply. Lithium prices in particular have plunged nearly 90% from their December 2022 peak. As mine closures and bankruptcies proliferated, Beijing moved to curb output and initiate internal restructuring.

This shift is likely to translate into higher costs for Korean battery makers, given their heavy reliance on Chinese supply chains. Reduced Chinese production would compel Korean firms to source more expensive non-Chinese raw materials. According to the Korea Nonferrous Metals Association, Korea’s imports of nonferrous metals from China in July totaled $327.2 million, accounting for 16.8% of total import value—the largest single-country share. Any contraction in Chinese supply will inevitably reverberate across Korea’s battery sector.

Such developments could deal a heavy blow to Korean manufacturers already struggling with declining market share. Market research firm SNE Research reported that global battery usage for electric vehicles (EVs), plug-in hybrids (PHEVs), and hybrids (HEVs) registered between January and August this year reached 691.3GWh—up 34.9% from a year earlier. Yet the combined global market share of Korea’s three major battery producers fell 3.8 percentage points to 16.8%.

In contrast, Chinese players continued their rapid ascent. CATL maintained its leading position with 254.5GWh, up 31.9% year-on-year, while BYD surged 50.3% to 124.8GWh, ranking second globally. Notably, BYD’s battery usage in Europe reached 8.6GWh in the first half, up 263.1% year-on-year. Other Chinese firms—including CALB (4th), Gotion (7th), EVE (9th), and SVOLT (10th)—secured six of the top ten global positions. China’s “Made in China 2025” initiative, which injected massive state funds into strategic industries, has effectively upended the global balance of power.

From Steel and Oil to Batteries—Korea’s Growing Vulnerability and the Cost of Misjudging Technological Shifts

Experts point to Korea’s failure to anticipate technological change as the battery industry’s most critical mistake. For years, domestic companies assumed that high-performance nickel-cobalt-manganese (NCM) batteries would dominate the market, expecting solid-state technology to eventually resolve their fire-safety risks. However, development proved slower than anticipated, and the pace of technological transition lagged. During that time, China advanced lithium iron phosphate (LFP) technology—once dismissed as low-cost and low-performance—and rapidly enhanced its capabilities, making LFP batteries suitable for EVs. With lower costs and greater safety, China has also come to dominate the fast-growing energy storage system (ESS) sector. Now, Chinese firms are on the verge of commercializing sodium-ion batteries, which are even cheaper and non-flammable, while Korea remains stuck at the LFP mass-production stage.

Declining research and development (R&D) efficiency has further eroded industrial competitiveness. Despite a surge in funding for battery-related projects in recent years, tangible technological achievements rarely translated into industrial applications. Press releases touting “world-class innovation” were plentiful, but successful commercialization cases were few. Government support systems also lacked consistency: long-term five-year R&D roadmaps have given way to ad-hoc annual initiatives, leading to fragmented funding, diluted expertise, and weak oversight.

At a deeper level lies a misjudgment of China’s industrial capabilities. Korean firms long underestimated Chinese technology—initially dismissing poor quality as non-competitive, later simplifying China’s progress as mere low-cost strategy. When Chinese market share began to rise, Korean firms pivoted toward “high-value-added products” to avoid direct confrontation. Even after China achieved both cost and performance competitiveness, Korean companies continued to downplay it, citing durability and safety concerns. The outcome: surrendering significant portions of their core markets. Today, Chinese firms have not only combined affordability with technological sophistication but are increasingly targeting the premium segment as well. If this trajectory continues, the space left for Korea’s battery industry will only narrow further.