Charging Up the Automotive Industry

The battery market for electric vehicles is going from strength to strength. But it is still characterized by a high level of uncertainty with significant swings in demand. LG Chem is managing this volatility at its giant plant in Poland.


In the fast lane: New models like Volkswagen’s ID.3 are expected to accelerate the shift to electromobility. The electric car is based on the Group’s modular electric drive matrix (MEB).Volkswagen AG/Oliver Killig

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.

At a glance

LG Group

… was founded in South Korea in 1947 as Lucky Chemical Industrial Co. Today the company has 250,000 employees worldwide  with subsidiaries in chemicals, electronics, and telecommunications and services. In 2019 the business recorded sales of USD 137.2 billion.

Managing complexity is 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.

Passenger car market worldwide

Elec­tri­fi­ca­tion on the rise

The share of passenger cars worldwide with electric and hybrid drives is expected to surpass 90 percent by 2050, with overall production volume expected to double over the same period. (Source: Porsche Consulting)Porsche Consulting

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.

We want to create the green factory of the future.

Kyong Deuk Jeong
President of LG Chem Wrocław Energy

Sustainability and innovation

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 coronavirus crisis changes everything

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.

Government incentives spark up markets

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.

Battery demand worldwide

Strong growth forecast

The global demand for battery power is expected to reach up to 13,000 gigawatt hours by 2050. (Source: Porsche Consulting)Porsche Consulting

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.”

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