Spats between two South Korean EV battery makers could derail supplies and disrupt vehicle launches, according to a media report.
SK Innovation which recently broke ground for a US$1.7bn factory in Commerce, Georgia, to supply VW's Chattanooga electric vehicle hub in the US, was hit with a lawsuit in the US by rival LG Chem which had lost 77 employees to its rival, Reuters reported.
Go deeper with GlobalData
The pair have now exchanged lawsuits alleging battery patent infringements.
US court filings reviewed by Reuters show the feuding firms are trying to stop each other from importing and selling EV batteries destined for numerous EVs made in the US and elsewhere.
This jeopardises the companies' ability to supply automakers in the US with batteries just as the car producers are scrambling to lock in supplies with lucrative contracts ahead of an expected surge in demand, according to court filings by the two companies and several industry experts.
See Also:
"Whoever loses the fight would suffer a fatal blow, unless the two reach a settlement. This will also be a setback for automakers," Cho Jae-phil, a professor at Ulsan National Institute of Science and Technology who worked previously at another Korean rival, Samsung SDI, told Reuters.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThe news agency noted VW had said it was worried there would not be enough batteries for all the EVs it plans to launch in the next five years, partly because producers such as LGC and China's CATL don't have enough skilled workers for new plants in Europe to ramp up output quickly.
According to Korea's battery industry tracker SNE Research, the market for EV batteries – the most expensive and important component in the vehicles – is set to grow 23% a year to reach $167bn by 2025, making it bigger than the global memory chip market which is expected to be worth $150bn by then.
In one court filing, the report said, LGC claimed its rival poached employees working on its own project to supply batteries for VW's MEB electric vehicle architecture and SKI only won the VW contract because it had misappropriated trade secrets.
SKI has denied stealing trade secrets, saying its staff signed agreements not to use information from former workplaces.
"We value intellectual property," an SKI spokesman told Reuters.
If the US International Trade Commission (ITC) rules in favour of LGC next 5 June, when it is due to make a preliminary ruling, that could jeopardise SKI's plans to supply VW in the US with batteries from Georgia or a new factory in Hungary, according to court filings cited by Reuters.
SKI is scheduled to start US battery production in 2022.
LGC said a final ruling on the case would be made on 5 October, 2020 but it asked the ITC earlier this month to make a so-called default judgment against SKI quickly.
According to a memo obtained by Reuters, the commission's investigative staff recommended a motion in favour of LGC as it is "the most appropriate sanction for respondents' (SKI's) widespread spoliation of evidence".
Evidence spoliation is destruction or alteration of evidence that may be used in a legal proceeding, the news agency said.
Beejay Kim, a battery consultant, told Reuters Volkswagen may have to broker a truce as the dispute could disrupt not only battery suppliers but also reduce competition between vendors.
"No one wants them to fight till the end," he added.
