Charging Up the Automotive Industry

The elec­tri­fi­ca­tion of the car indus­try is push­ing demand for bat­ter­ies steadi­ly upwards, with the num­ber of elec­tric and hybrid vehi­cles antic­i­pat­ed to reach over 90 per­cent of mar­ket share by 2050—up from less than 10 per­cent in 2018—while the annu­al pro­duc­tion of cars world­wide is expect­ed to dou­ble by then. To meet this demand, the pro­duc­tion capac­i­ty for bat­ter­ies is pre­dict­ed to see a sev­en­teen-fold increase mea­sured in gigawatt hours with­in the same time frame.

LG Chem, num­ber four in the world’s most valu­able chem­i­cal com­pa­nies, has over twen­ty years of expe­ri­ence in the bat­tery mar­ket. In 2018, the com­pa­ny built Europe’s largest plant for lithi­um-ion bat­ter­ies for elec­tric vehi­cles. The fac­to­ry near Wrocław in Poland is four times larg­er than Tesla’s Gigafac­to­ry 1 in the Unit­ed States. More than fifty pro­duc­tion lines sup­ply Euro­pean car man­u­fac­tur­ers with indi­vid­ual cells and com­plete mod­ules. While the growth fore­casts are favor­able, LG Chem needs to adapt con­stant­ly to very dynam­ic mar­ket con­di­tions. To main­tain unprece­dent­ed demand and growth, opti­miza­tion of process­es and align­ment with OEMs are key.

The process­es involved are com­plex, both in terms of man­u­fac­tur­ing and in terms of align­ing sup­pli­ers with OEMs. The pro­duc­tion of a pouch cell illus­trates this. The light­weight cells go through fif­teen pro­duc­tion stages with more than 1,500 defined process para­me­ters before they leave the plant after strin­gent qual­i­ty con­trols. Cus­tomers like Volk­swa­gen have very spe­cif­ic require­ments for their dif­fer­ent brands, includ­ing tech­ni­cal releas­es for new prod­ucts and strict pur­chase guide­lines that sup­pli­ers have to adhere to.

For LG Chem, the setup of the plant in Poland was there­fore new ter­ri­to­ry. In order to ensure a smooth launch and to stream­line process­es, LG Chem com­mis­sioned Porsche Con­sult­ing to accom­pa­ny the busi­ness through the setup phase. After in-depth assess­ments, it became appar­ent that improv­ing equip­ment main­te­nance would allow the plant to increase out­put to meet demand with­out deploy­ing addi­tion­al resources. “With the main­te­nance approach of Porsche Con­sult­ing, we can increase our out­put by 14 per­cent,” says Kyong Deuk Jeong, Pres­i­dent of LG Chem Wrocław Energy.

Elec­tri­fi­ca­tion on the rise

An essen­tial part of the suc­cess­ful devel­op­ment of the plant, which is set to expand to more than 100 GWh capac­i­ty, was the care­ful man­age­ment of the ramp-up process. The chal­lenge was to grow while sup­ply­ing qual­i­ty prod­ucts at the same time. Anoth­er chal­lenge was rec­on­cil­ing the Kore­an busi­ness with the work prac­tices and demands of OEMs such as Volk­swa­gen. LG Chem is rel­a­tive­ly new to the auto­mo­tive indus­try, and lan­guage and cul­tur­al dif­fer­ences also added to the com­plex­i­ty. “Good com­mu­ni­ca­tion is essen­tial when oper­at­ing in such dynam­ic con­di­tions. Cus­tomer sym­po­siums and R&D net­works help us under­stand cus­tomer require­ments and align our prod­uct port­fo­lio accord­ing­ly,” says Jeong. The approach has been fruit­ful. “The suc­cess­ful intro­duc­tion of the long cell tech­nol­o­gy for the rev­o­lu­tion­ary Volk­swa­gen  mod­u­lar elec­tric drive matrix is an excel­lent exam­ple of how our co-work­ing with OEMs pro­duces world-first tech­nolo­gies,” he says.

But com­plex­i­ty is not the only issue the busi­ness is con­cerned with. Sus­tain­abil­i­ty in all its mul­ti­ple facets is a top pri­or­i­ty backed by senior man­age­ment at the LG Chem Group level. “Besides deliv­er­ing bat­ter­ies for fuel-free vehi­cles, we want to move on and also cre­ate the green fac­to­ry of the future,” says Jeong. As OEMs seek to reduce the car­bon foot­print in their sup­ply chains, more and more sup­pli­ers are switch­ing to renew­able resources. “The sec­ond pri­or­i­ty is to main­tain and fur­ther devel­op our com­pet­i­tive tech­nol­o­gy edge.” The com­pa­ny is invest­ing in in-house R&D and forg­ing part­ner­ships with advanced bat­tery tech­nol­o­gy companies.

The Covid-19 out­break impact­ed the busi­ness in sev­er­al ways. Inter­nal teams had to man­age the new health sit­u­a­tion on site. Reg­u­lar hand san­i­ta­tion, keep­ing dis­tance, and wear­ing masks were intro­duced, but these mea­sures did not hin­der oper­a­tions. “Our employ­ees react­ed real­ly well and fol­lowed the new reg­u­la­tions,” says Jeong. How­ev­er, sup­plies of vital pro­duc­tion mate­ri­als were delayed due to logis­ti­cal prob­lems and shut­downs of sup­pli­er fac­to­ries. LG Chem coped well with the sit­u­a­tion thanks to suf­fi­cient stocks of raw mate­ri­als, their exten­sive expe­ri­ence in man­ag­ing sup­pli­ers and strong net­works, and—last but not least—hard work and creativity.

A more chal­leng­ing task was the ramp-up process of the pro­duc­tion lines as the corona­virus cri­sis hit the indus­try. Inter­rupt­ing the setup and train­ing of peo­ple was sim­ply not an option. Orig­i­nal­ly, the lines were set up and test­ed in South Korea and then shipped to Poland for instal­la­tion. With the lock­down in place, expe­ri­enced experts from South Korea were not read­i­ly avail­able. Staff who were still in Poland extend­ed their stay and dig­i­tal remote tools assist­ed in the process.

With con­sumers in lock­down and lit­tle over­all com­mer­cial activ­i­ty, demand from OEMs nat­u­ral­ly shrank. “Frankly, I was won­der­ing how to man­age bat­tery pro­duc­tion in case we expe­ri­enced a dra­mat­ic drop in demand, espe­cial­ly in the Euro­pean mar­ket,” says Jeong. Luck­i­ly, his wor­ries were allayed. Ini­tia­tives by Euro­pean coun­tries includ­ing Ger­many pro­vid­ed addi­tion­al incen­tives for elec­tric vehi­cles in order to help reopen the mar­ket. After a pause, OEMs slow­ly began pro­duc­tion again. But as LG Chem con­tin­ued man­u­fac­tur­ing through­out the coro­na cri­sis, a pro­por­tion of the bat­ter­ies pro­duced were stock­piled by OEMs.

Strong growth forecast

Since Jan­u­ary 2020, LG Chem has ranked No. 1 in the Euro­pean elec­tric vehi­cle bat­tery mar­ket with an 80 per­cent mar­ket share, accord­ing to Jeong. And glob­al­ly as well, LG Chem leads the field with a mar­ket share of 24 per­cent (January–May 2020). It has taken sig­nif­i­cant invest­ment to reach this posi­tion. Over the medi­um term, the busi­ness is focused on prof­itabil­i­ty and aims to main­tain its posi­tion as mar­ket leader built on strong cus­tomer rela­tion­ships. “With­out a doubt, elec­tric vehi­cle tech­nol­o­gy will replace the major­i­ty of com­bus­tion engines in the mid- to long term,” says Jeong. “This presents us with a great oppor­tu­ni­ty to serve the Euro­pean mar­ket and engage in new devel­op­ments such as the cobalt-free and solid-state bat­ter­ies, which will enhance safe­ty and performance.”