Battery Market Landscape Shifts: South Korea Smiles at US ESS Growth, China Frowns at Supply Glut

The competitive landscape for Korean and Chinese battery manufacturers in the global market has recently diverged. Domestic producers, including LG Energy Solution and Samsung SDI, are seeing growing expectations that their performance will continue to improve, driven by rising demand in the United States for energy storage systems (ESS). In contrast, Chinese firms face a red light on growth due to concerns over supply oversaturation and U.S. regulations targeting products made in China.

CATL, China’s leading battery maker, has posted top-line growth, yet its profit margins are flashing warning signs.

According to industry sources on the 9th, CATL, the world’s largest battery manufacturer, reported third-quarter revenue of 165.221 billion yuan (approximately 33.3 trillion won), a 58.9% year-on-year increase. Net profit rose 14.5% to 21.246 billion yuan (approximately 4.3 trillion won).

Despite double-digit growth in both revenue and net profit compared to the same period last year, the figures fell significantly short of financial market expectations. LSEG had projected a 60.2% increase in CATL’s third-quarter revenue and a 41.2% rise in net profit.

The below-expectations results were immediately reflected in the company’s share price. On the 20th of last month, when the third-quarter earnings were released, CATL’s stock price on the Hong Kong stock exchange dropped 6.6% from the previous day. Global investment bank JPMorgan also downgraded its investment rating on CATL’s shares listed in Hong Kong from “Overweight” to “Neutral.”

The scale of Chinese battery manufacturers, including CATL, continues to expand steadily. In particular, the share of Chinese products in the electric vehicle market has been expanding further since the beginning of this year.

According to market research firm SNE Research, the combined market share of seven Chinese companies, including CATL, in batteries installed in global electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), and hybrid electric vehicles (HEVs) from the start of the year through September reached 73%, up 3.5 percentage points from the same period last year. In contrast, the combined share of South Korea’s top three firms—LG Energy Solution, Samsung SDI, and SK On—fell 4.1 percentage points to 12.6%.

The core issue is that profitability is lagging behind top-line growth. As competition in the domestic market becomes saturated, China is flooding overseas markets with low-priced products. Additionally, the worsening profitability of major manufacturers like CATL is attributed to electric vehicle makers, struggling with excessive competition, diversifying their supply chains to smaller, cheaper battery suppliers to reduce costs.

According to the South China Morning Post (SCMP), Chinese electric vehicle manufacturers Xiaomi and Li Auto announced they would collaborate with battery makers CALB and EVE Energy to reduce procurement costs. CALB and EVE Energy are classified as a tier below major players like CATL and BYD in China.

South Korean battery makers are poised to benefit from the expanding energy storage system market in the United States.

South Korean battery manufacturers are posting results that exceed market forecasts, a stark contrast to the challenges faced by their Chinese counterparts. While the electric vehicle battery sector remains under pressure from low-cost Chinese competitors, a surge in demand for energy storage systems in the United States has provided a significant tailwind for domestic firms.

Samsung SDI reported third-quarter revenue of 4.6856 trillion won and an operating profit of 407.8 billion won. Revenue rose 52.6% year-on-year, while the company swung from an operating loss of 591.3 billion won in the same period last year to a profit. The operating profit was double the previous quarter’s 203.8 billion won, marking the highest figure in 12 quarters since the third quarter of 2023.

The company’s operating profit significantly surpassed the market consensus of 235.4 billion won, delivering an earnings surprise that stood in sharp contrast to the performance of CATL.

LG Energy Solution also saw its revenue jump 59% year-on-year to 9.6434 trillion won during the same period. Its operating profit increased by 25.7% to 756 billion won. Both metrics represent all-time quarterly records for the company. LG Energy Solution’s third-quarter operating profit was more than double the market consensus estimate of 320 billion won.

Both Samsung SDI and LG Energy Solution attributed their improved performance to a substantial increase in demand for energy storage systems for artificial intelligence data centers in the United States. They also noted that a gradual recovery in the European electric vehicle market contributed to a rebound in sales of batteries for electric vehicles.

The U.S. midterm elections, in which the Democratic Party secured a decisive victory, are expected to sustain the momentum behind energy storage system (ESS) demand and reinforce efforts to check the influence of Chinese manufacturers.

Industry analysts anticipate that the rapid expansion of the energy storage system (ESS) market in the United States will sustain the improving performance of South Korean manufacturers. A significant factor in this outlook is the decisive victory of the Democratic Party in the U.S. midterm elections held on November 3, a party that has campaigned on expanding energy infrastructure, including ESS deployment.

According to a report by Voice of America (VOA) on November 9, although the final tally is not yet complete, the Democrats have already secured 252 seats in the House of Representatives, far exceeding the majority threshold of 218, compared to 161 seats for the Republicans. In the Senate, the Democrats have claimed 52 seats, outpacing the 44 seats held by the Republicans. The party also led in gubernatorial races, winning in 28 states against 20 for the Republicans.

In May, the Democratic Party outlined an energy agenda that includes plans to increase investment in national transmission grid facilities and energy storage systems. While the party maintains a negative stance on regulating the construction of artificial intelligence data centers, it intends to continue expanding the ESS market to support broader power grid infrastructure.

Hyundai Securities, in a report published prior to the midterm elections, noted that if the Democrats gain control of both chambers of Congress, they are likely to pursue the restoration of renewable energy tax credits and an expansion of ESS investments. The report further observed that both major parties have a history of strengthening tariff policies against Chinese-made batteries, suggesting that the direction of blocking Chinese supply chains will likely persist after the election.

However, some observers are predicting a potential rebound for Chinese battery manufacturers. This view is based on China’s own increased investment in ESS and the likelihood that newly constructed factories in Europe will begin operations, potentially eroding the European electric vehicle battery market further.

The European Union currently imposes high tariffs on Chinese-made electric vehicles. Additionally, the Industrial Acceleration Act (IAA), a measure aimed at curbing Chinese influence and protecting domestic industries, is in the final stages of detailed discussion ahead of its enactment. In response, Chinese battery makers such as CATL and BYD are constructing plants in countries including Hungary and Poland.

A battery industry official stated that while the administration of U.S. President Donald Trump and Congress are intensifying measures to check Chinese products, China remains a dominant force, holding over 90% of the global ESS market for power grids. The official added that domestic companies must diversify their supply chains to markets beyond the United States.