In 2025, Korea's industrial sectors saw mixed fortunes. Automobiles and petrochemicals struggled under the impact of high U.S. tariffs and the Russia-Ukraine war, while shipbuilding and defense enjoyed a boom as global demand rose. We examine the key issues that will drive the global economy in 2026 and forecast the sector-by-sector effects. [Editor's note]
"The situation has changed significantly over the past few months. We plan to spend $19.5 billion (about 28 trillion won) to scale back the electric vehicle business, but we decided it was better to restructure the business even if we had to absorb that."
Jim Farley, Ford's chief executive officer, said this in a Dec. 16 interview last year (local time) with Reuters regarding the rationale for scaling back the electric vehicle business. Ford halted production of the F-150 Lightning, its large electric pickup truck, and instead decided to shift its business structure toward hybrid and internal combustion engine vehicles.
Andrew Frick, who oversees Ford's gasoline engine and electric vehicle businesses, said, "Rather than investing additional billions of dollars in unprofitable large electric vehicles, we should allocate capital to areas with higher margins," and added, "The electric vehicle business has become less profitable due to lower-than-expected demand, high expense, and regulatory changes."
Ford is not the only automaker to scale back its electric vehicle business. Mercedes-Benz revised its previous goal of converting all new cars to electric by 2030. Volvo also changed its plan to produce only pure electric cars by 2030 and will build plug-in hybrids as well.
As automakers repeatedly revise their electrification plans, Korea's battery industry is expected to face another difficult year. The United States scrapped electric vehicle subsidies last September, and the European Union also decided to delay the timeline for a complete ban on new internal combustion engine car sales that had been set for 2035. As a result, Korea's three battery makers — LG Energy Solution, Samsung SDI, and SK On — will find it hard to sustain their anticipated growth momentum.
Battery analysts at domestic securities firms projected that the cold spell for Korea's battery industry will continue this year and noted it is time to swiftly find alternatives.
Cho Hyeon-ryeol, an analyst at Samsung Securities, said, "Electric vehicle demand this year will reach 23.5 million units, up 9.4% from last year," and added, "Compared with last year's 20.7% year-over-year increase, a slowdown in the electric vehicle market's growth seems inevitable."
Lee Anna, an analyst at Yuanta Securities Korea, said, "With the United States abolishing electric vehicle subsidies, U.S. electric vehicle sales this year could even contract," and added, "Combined with the EU's easing of the full ban on internal combustion engine cars, a slowdown in electric vehicle sales is expected." The analyst added, "The Western electric vehicle market is set to face a 'pause,' so it will not be easy for battery market conditions to recover."
◇ U.S. and EU scale back EV promotion… Seeking a new breakthrough with ESS
The battery industry is expected to make up for reduced sales from weaker electric vehicle demand with energy storage systems (ESS). As the second Donald Trump administration launched last year imposed a 40.9% tariff on China-made ESS batteries, Korean batteries have an opportunity to replace Chinese products. The tariff on China-made ESS batteries is set to rise to 58.4% this year.
Until 2024, the North American ESS market was dominated by China. According to SNE Research, North American ESS battery demand in 2024 was 78 gigawatt-hours (GWh), of which China's CATL, BYD, and EVE supplied about 68 GWh, or roughly 87%. However, with the launch of the second Trump administration and the imposition of high tariffs on Chinese products, opportunities have expanded for Korean companies to enter the market.
Industry watchers expect the market shares of Korean and Chinese battery makers to shift significantly in the global market this year. Korea's three battery makers are set to begin full-scale mass production of low-cost lithium iron phosphate (LFP) batteries, mainly used in ESS and low- to mid-priced electric vehicles.
Analyst Lee Anna said, "It is true that Korean battery makers lag China in technology and price competitiveness in the LFP battery market," but added, "Even so, Korean companies are bound to benefit from U.S.-China tensions and China regulations under the Trump administration."
◇ "ESS optimism" is premature… U.S. competitors joining, risk of China's low-price offensive
Still, many say it is far from enough to expect earnings improvement solely from the U.S. ESS market. The ESS market is much smaller than the electric vehicle sector, making it inevitably difficult to offset the drop in EV battery demand.
Cho Hyeon-ryeol said, "The expansion of the ESS market will likely only partially offset the reduced revenue in the electric vehicle battery institutional sector," adding, "Even that will apply only to some domestic companies this year." LG Energy Solution is already producing ESS-use LFP batteries at its U.S. plant, while Samsung SDI and SK On are not scheduled to begin mass production until the fourth quarter of this year.
Some also argue that the U.S. ESS market is too small for Korea's three battery makers to compete in. Hwang Kyu-won, an analyst at Yuanta Securities Korea, said, "Ford announced it would produce ESS-use LFP batteries at its own plant instead of building a joint plant with SK On," noting that competition is intensifying as automakers themselves have recently joined the fray.
Cho Hyeon-ryeol said, "We have found that Chinese battery makers have been selling ESS-use batteries in the United States at prices comparable to those of Korean battery makers even while absorbing the tariff," adding, "This suggests that the opportunities Korea's three battery makers are expected to gain from the Trump administration's China regulations may be smaller than anticipated."
◇ The three battery makers focus on developing solid-state batteries, following LFP and nickel-based ternary
Although growth in the electric vehicle market has recently slowed, the market itself continues to expand. Accordingly, Korea's battery manufacturers are expected to keep investing this year to secure next-generation EV battery technologies.
The International Energy Agency (IEA) projected that demand for electric vehicle batteries will surge from 1 terawatt last 2024 to more than 3 terawatts by 2030. Regionally, the share of EV battery demand from emerging markets and developing countries excluding China is forecast to grow from 5% in 2024 to 10% in 2030.
In the battery industry, many say that to survive competition with China, companies must secure the next technology beyond low-cost LFP and high-priced nickel-based ternary batteries. Korean battery manufacturers hold more advanced technology than China in nickel-based ternary batteries. However, as price competitiveness has grown in importance in the EV market and nickel-based ternary batteries carry a higher fire risk, Korean companies have lost ground.
Korean companies are conducting research on the next-generation technology, solid-state batteries. Samsung SDI produced large solid-state cell samples at its Suwon pilot line last year for commercial use targeted for next year and is supplying them to automakers for performance evaluation. LG Energy Solution has built a pilot line at its Ochang energy plant and is conducting mass production tests. SK On has completed a solid-state battery pilot plant at its Daejeon battery research center.
Analyst Lee Anna said, "Solid-state batteries to be commercialized after next year will first be applied to high-end electric vehicles such as Porsche and Mercedes-Benz." The analyst added, "Prices are still high, making it difficult to become the mainstream of the EV market for now, but if prices are cut through various approaches, there is a strong chance of securing a dominant position in high value-added markets such as premium electric vehicles and Humanoid Robot."