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The exhaustion of petroleum, global warming, a sharp increase in oil prices, and strategic competition of automobile industry, those current issues increase demand for green car. Until 2006, People didn't much concern about fuel price, because the highest point of international oil prices was only around 50 dollar per a barrel. The accumulate sales volume of HEV was approximately five hundred thousand, which is on one percent of total number of vehicles in the world. However, the size of green car market expanded twice in 2007, caused by a big jump in oil prices. The petroleum consumption by emerging countries such as China and India has surged. Otherwise new oilfields cannot be discovered. Those cause imbalance between supply and demand supply and demand of oil, and oil prices are expected to remain high for quite a long time. Thus, most of analysts forecast the constant growth in green car market.
Another factor accelerating green car development is domestic environmental regulations. According to vehicle emission regulation issued by EU, cars produced from 2012 will have limitation on the average carbon dioxide emissions to 130g/km. US government has a plan to obligatory maintain more than 12% of green car ratio among total sales volume to all car makers. Under those circumstances, car makers rush into green car development. The purpose of green car is to decrease pollutants reducing use of fossil fuel, ultimately achieve Zero Emission Vehicle (ZEV) (Yang 2008).
After all, from Internal Combustion Engine (ICE) to namely 'Green Car' such as Clean Diesel, Hybrid Electric Vehicle (HEV), Plug-in Hybrid Electric Vehicle (PHEV), Fuel Cell Electric Hybrid Vehicle (FCEV), Electric Vehicle (EV), they are classified by 'how much electric energy car uses'. [Table 1] shows types of Green cars and definitions.
[Table 1] Types of Green Cars and Definitions
also called 'environmentally friendly vehicle', it produces less harmful impacts to the environment than comparable conventional internal combustion engine vehicles running on gasoline or diesel
also called 'Ultra-low sulfur diesel (ULSD)', it defines diesel fuel with substantially lowered sulfur contents
Hybrid Electric Vehicle(HEV)
Hybrids combine a gas motor with an electric engine that can recharge on its own, offering a great way to extend the miles per gallon of gas your car uses to travel further distances
Plug-in Hybrid Electric Vehicle (PHEV)
also called a plug-in hybrid, it is a hybrid vehicle with rechargeable batteries that can be restored to full charge by connecting a plug to an external electric power source
PHEV shares the characteristics of both a conventional hybrid electric vehicle, having an electric motor and an internal combustion engine
Fuel Cell Electric Hybrid Vehicle (FCEV)
FCEV uses a battery to convert hydrogen and oxygen chemicals into electricity, and it can last as long as the energy continues to flow. FCEV helps reduce greenhouse gas emissions by 70-80 percent and can use both renewable resources and natural gas
Electric Vehicle (EV)
EV is a zero-emissions vehicle (ZEV) that produces no harmful fuel emissions because it relies purely on electricity from batteries to run
Rechargeable Battery for Green Car
Ni-MH Battery and Li-Ion Battery
In the early of 1990, Ni-MH cells formed stable market replacing Ni-Cd. Ni-MH battery is not expensive and not explosive especially comparing to Li-ion. With those advantages, Toyota Prius, Camry, Honda Civic, BMW x6 are loading Ni-MH batteries. However, trends of rechargeable batteries are ahead for high capacity but minimizing (KISTI 2009). In this context, advanced Lithium type batteries are at the heart of the coming wave of electric cars and plug-in hybrids.
Recently, Li-ion battery received public attention to be discussed about new technology for EV/PHEV. Considering the advent of Li-Ion cells, Sony firstly commercialized it in 1992 for electronic devices. From this point, Li-ion battery applied for mobile phones, MP3Ps, notebooks, net books, and so on. It has an advantage of light weight, but also disadvantaged of vulnerableness to heat. For example, it is known as a causing factor of 'battery explosion' occurred in mobiles and notebooks. And this is why Toyota adheres to Ni-MH battery for Prius (LG Business Insight 2008).
Latest technology trends of electric-car battery are adopting advanced Li-Ion types such as Li-Ion Battery, Lithium Polymer Batteries(LPB) etc. For instance, Hyundai loads LPB to its HEV. In other words, LG Chem's LPB will be loaded to 2011 YF Sonata, Avante Hybrid, Forte LPI. Moreover, former Ni-MH user Toyota announced the plan to load Li-Ion Battery to HEV, expected to go on producing in 2011. And Honda will sell PHEV and EV with Li-Ion from 2012. [Table 2] compares characteristics between Ni-MH and Li-Ion.
[Table 2] Comparing Characteristics between Ni-MH and Li-Ion Battery
Approx. 5 years
Approx. 10 years
Source: LG Business Insight 2008, weekly focus: ë¦¬íŠ¬ì „ì§€, í•˜ì´ë¸Œë¦¬ë“œì¹´ì™€ í•¨ê»˜ ë‹¬ë¦°ë‹¤.
Researchers anticipate that the main stream of green car is pure electric vehicle, in the near future. Ni-MH cells are frequently used to HEV with the advantages of less expensive and less vulnerable, until now. With accelerated PHEV and EV development, however, it is inevitable to using Li-Ion Batter. With forecasting market share of Electric-car batteries [Figure 1], we can see rapidly increasing demand of Li-Ion cells.
[Figure 1] Market Share of Electric-Car Batteries
Source: LG Business Insight 2008, weekly focus: ë¦¬íŠ¬ì „ì§€, í•˜ì´ë¸Œë¦¬ë“œì¹´ì™€ í•¨ê»˜ ë‹¬ë¦°ë‹¤.
(forecasting figures from 2009)
Core technology of EV is based on 'Battery'. Electric-car battery, accounting for 15 percent of total cost, is a core component. Therefore, the expanding market for better batteries is also expected along with rapid growth of HEV/EV market.
[Figure 2] Manufacturing Cost of HEV Major Components (%)
Source: LG Business Insight 2008, weekly focus: Lithium Battery, í•˜ì´ë¸Œë¦¬ë“œì¹´ì™€ í•¨ê»˜ ë‹¬ë¦°ë‹¤, LGERI, 2008.
For more available Li-Ion Batteries, automobile corporations face the problems of cost cut and battery duration. Most of hybrid vehicles take in Ni-MH type batteries including Toyota Prius, Camry, BMW x6 and so on, and this is because of inexpensive price. In spite of heavy weight and week storage capacity, 80~90 percent of HEV adopt Ni-MH batteries. For instance, Mitsubishi i-MiEV (EV with Li-Ion) costs twice than Toyota Prius (HEV with Ni-MH) (Park et al. 2010). Battery makers are competing in price reduction and improving its quality. However, it is not sufficient for making a contract to supply HEV/EV batteries. Moving its core systems from ICE to electric systems, car manufacturers multiply their alliance strategically and technically for new product development. For developing hybrid/electric car batteries, which are somewhat new products, partnership with co-developer is also critical factor, based on technical capability and resources. At the following part, strategy of LG Chem is analyzed.
â…¢. LG Chemical
"Now, LG Chem is no more 'Fast Follower' but 'First Mover' in the Li-ion rechargeable battery for EV."
ë¨¸ë‹ˆíˆ¬ë°ì´, August 21, 2009
At 2009 Frost & Sullivan Asia Pacific Industrial Technologies Awards, Kim Ban-suck, vise president of LG Chem., added that "LG Chem will invest to EV battery constantly and pursue innovative activities." Annually, Frost & Sullivan, a global market research and consulting institute, select and announce companies which accomplish excellent performance in each industry. LG Chem, which is recognized as the best technology in electric-car battery field, received Energy Storage Company of the Year Award in Singapore 2009.
Obviously, LG Chem was late coming into the market of electric-car batteries but now at the top of the industry. An article from business week well described the critical situation.
No's vision -- particularly for batteries -- is ambitious. Sanyo's market share is nearly 30%, about triple what LG has. Rising prices for raw materials such as cobalt pushed LG's battery business into the red last year, while Sanyo enjoyed an estimated 6% profit margin. Competition is fierce: Sony and Matsushita Battery Industrial are bigger than LG; local rival Samsung SDI Co. is about the same size; and China's BYD and Lishen are expanding aggressively as more electronic gadgets are made in China.
How LG Chem Is Changing Its Formula
BUSINESS WEEK, ASIAN BUSINESS, MAY 16, 2005
LG Chem, de facto Fast Follower, awarded contracts with 8 of global automobile corporations to supply Li-ion battery for EV, from 2009 to 2010. Shin eun-ju, an analyst at Korea investment security, said that LG Chem is already global leader of mid-large format Li-ion battery field, especially for EV.
To become 'First Mover' from 'Fast Follower', How LG Chem is changing its formula?
Lee Young han, a researcher at LG Chem Research Park, pointed out 'speed management' and 'partnership' as their competitive advantages in such technology intensive industry. In this context, 'Partnership' means 'co-development alliance', doesn't intend to make Quanxi(é-œä¿‚) or rebate taking.
In the formation stage of collaborative new product development, the partner selection process is critical. According to Emden et al. (2006), three phases consist of the process: technical alignment è strategic alignment è relational alignment. At the first phase of technical alignment, partner's technical ability and resources are important factors. And then, companies seek to the partner who can share and achieve the goal. At the latest, companies consider about compatible culture, propensity to change, and long-term orientation. To achieve co-development of HEV/EV batteries with global car makers, LG Chem proceeded step by step. [Table 3] shows how LG Chem developed the partnership based on technical capability with global automobile companies.
[Table 3] History of LG Chem in Electric-car Battery Field
Partner Automobile company
Embarking on R&D of electric-car battery
Establishing R&D subsidiary CPI(Compact Power Intercorporate)in US
Electric car with lithium polymer batteries of LG Chem, winner at Pikes Peak International Auto Rally for 2 years in a row
Obtaining an order from USABC (United States Advanced Battery Consortium) established by US DOE and 3 major car makers
Selected as R&D partner of lithium polymer batteries for E-Bike
Selected as R&D partner of lithium polymer batteries for GM Volt
Contract to supply lithium polymer batteries to Hyundai Avante (HEV)
Contract to supply lithium polymer batteries to GM Volt
Received 2009 Energy Storage Company of the year Award at Frost&Sullivan Asia Pacific Industrial Technologies Awards
Contract to supply electric-car batteries to CT&T, entering NEV car market
Contract to supply hybrid-car batteries to Eaton from 2010 for 4years, entering commercial car market
chongqing Changan Automobile co.
Agreement to supply hybrid-car batteries(Li-ion) to Changan Automobile in the second half of 2010
Through the contract with Volvo, Approved technology and safety of LG Chem batteries
Contract to supply electric-car batteries to Ford FOCUS
Securing customer relationship with 2 of 3 major US car makers
Building $303 Million Advanced Battery Plant in Holland, Michigan
Contract to supply batteries to Renault for its pure electric vehicle project
In 2001, LG Chem established R&D subsidiary Compact Power Intercorporate (CPI) in Detroit known as the world's traditional automotive center. Lee Young han said, establishing R&D subsidiary in Detroit was targeting co-development with US car makers. From this point, LG Chem showed more aggressive activities such as participating in consortium. In 2004, they participated in United States Advanced Battery Consortium (USABC) established by US DOE and 3 major car makers (GM, Ford, Chrysler). LG Chem obtained an order from this consortium, and it became big opportunity to be officially recognized their technical capability. With the confidence of technology, LG Chem tried to co-develop with GM because technology of LG Chem and its goal coincide ones of GM Volt. GM wanted lighter battery complimenting its defect, vulnerable to heat.
The Volt is designed to use new lithium-ion battery packs, which hold a charge longer than the nickel metal hydride batteries currently in use. One problem is that these are known to overheat and catch fire. They are however lighter and already in widespread use in consumer electronics such as laptops and cell phones.
GM Volt homepage, January 13, 2007
In 2007, GM Volt selected LG Chem as R&D partner and begun to co-develop lithium polymer batteries. LG Chem was not only partner to GM Volt, however, US battery maker A123 also join co-development as well. Most of related people expected that A123 would be final winner at GM Volt battery match. People might neglect that LG Chem was not an amateur. For developing batteries for HEV/EV, LG Chem has co-developed with Hyundai since 2002. Moreover, LG Chem has supplied hybrid-car batteries to Hyundai since 2007. Unexpectedly but not surprisingly, LG Chem became the winner with contract to supply lithium polymer batteries to GM Volt.
[Table 4] LG Chem's Major Project Process with GM and Hyundai
Taking participate in conference for GM Volt battery ('07. 03)
Co-development with Hyundai ('02.10)
One of selected two battery developer for GM Volt ('07. 06)
Embarking on developing batteries of Avante HEV ('06.01~)
Offering samples ('07.11~12)
Contract to supply batteries to Hyundai ('07.01)
Selected LG Chem' battery control system for GM Volt ('08.10)
Co-managing Government R &D project in energy system for PHEV (totally 3 projects) ('08.12~)
Contract to supply batteries to GM Volt ('09.01)
Source: Industry Analysis Report: Chemical/Display/Rechargeable Battery, Korea Investment Security, 2010.
Clearing way A123, LG Chem has more competitiveness, excepting technological capability. It is their culture 'Speed Management'. Culture of LG Chem is more suitable to satisfy customer's needs including GM, Hyundai, Ford, Renault, and so on. It is somewhat related with relational alignment.
The phrase 'Speed Management', the critical culture of LG Chem, is easily found at LG Chem's homepage. For their 'Speed Management', members of LG Chem should be prior, faster, and more frequent than competitors. With Speed Management, LG Chem focuses on their strength. In the aspect of business management, they invest more resources to their core business, and industry. In the aspect of human resources, LG Chem tries to find out characters of each member and maximize their capability (lgchem.com). In other words, each of all members plays an important role in the decision making process, not only executives.
"Opinions of engineers in field are promptly reflected in management", emphasized a researcher Lee Young han. "so we can satisfy clients' needs, quickly. This is another competitive power of LG Chem."
After supply partnership with GM, LG Chem accelerated market expansion and establishing manufacturing pant in US. With the battery order from Volvo, not only technology but safety of LG Chem batteries is approved. Subsequently, LG Chem plans to supply electric-car batteries to Ford FOCUS. LG Chem expects to increasing sales volume along with that Ford plans to multiply PEV model in the near future (Chosun biz 2010). Hereby, LG Chem concludes partnership with two biggest vehicle manufacturers among major 3 in US.
In Holland Michigan, July 16 2010. US President Obama participated in the groundbreaking ceremony of the new LG Chem battery plant. This remarkable event shows strong determination of US government on investing in Clean Energy. The plant was funded in partially supported by a DOE stimulus grant of $151 million. Once fully operational in 2012, the plant will be capable of producing approximately two hundred thousand cells for HEVs and EVs, especially for both Chevrolet Volt and the upcoming Ford Focus Electric (gm-volt.com).
[Figure 3] Obama Meets President and Vice President of LG Chem
â…£. Competitors Analysis
No more conventional competitors in rechargeable battery field. There are JVs which is emerged by co-investment or equity sharing, usually between car makers and chemical companies (battery makers). These trends of emerging JVs also attach an importance to co-development in this industry.
[Table 5] JVs in HEV/EV Battery Industry
Toyota + Panasonic èPanasonic EV
Nissan + NEC èAESC
GS Yuasa + Mitsubishi Motors èLithium Energy Japan
GS Yuasa + Honda Motors èBlue Energy
Johnson Controls + Saft èJCI/Satf
Samsung SDI + BOSCH èSB Limotive
Toyota Prius (HEV) adopts Ni-MH battery of Panasonic EV. Honda Insight (HEV) is loaded with Ni-MH of Sanyo which is under M&A process by Panasonic. Through buying out, Panasonic is expected to expand its clients to Honda, Volkswagen, AUDI, Ford, and GM which were ones of Sanyo. Automobile and chemical companies in US and China give waning of Panasonic, becoming the world's biggest battery producer. Korean firms including LG Chem can make this threat to opportunities to approach US and Chinese automobile firms (Kim et al. 2008). Moreover, Toyota embarked on developing 'air cells' used for a hearing aid. According to Japan Insight (2008), Toyota established R&D center and it is only responsive to air-cell development.
AESC supplies Li-Ion batteries to Nissan Leaf (EV). GS Yuasa is major in Japanese market, especially in Lead-acid, Ni-Cd. However, GS Yuasa didn't commercialized Li-Ion batteries until 2009. GS Yuasa shares a 51% stake in each JVs, Lithium Energy Japan and Blue Energy. Mitsubishi Motors i-MiEV (EV) is loaded Li-Ion cells of Lithium Energy Japan. Honda motors invested totally 260 million dollar to Blue Energy (Shin et al. 2010). SB Limotive, joint venture between Samsung SDI and BOSCH, has a tendency to rely on EU market secured by BOSCH. According to Automotive News, 62% of total sales volume of BOSCH is concentrated in EU. Because BMW, a major client of SBL, lower sales in the US, it is difficult to generate cost competitiveness through economies of scale if SBL do not get the partnership with Volkswagen or PSA Group (Peugeot, Citroen) (Kim 2009.09).
â…¤. Managerial Recommendations
Visualization of the merger as Sanyo and Panasonic calls for diversification of alliance to U.S. and Chinese car companies and makes them to be wary of Japanese companies. Moreover, from the emergence of JVs between automobile manufacturers and battery makers, the importance of co-development and partnership is increasing.
Japanese major car producers such as Toyota, Nissan, Mitsubishi, Honda Motors joined with battery firms directly, and Samsung SDI took the competitive position through the JV with BOSCH.
LG Chem has been co-developing with US automobile firms more actively through the R&D subsidiary CPI in Detroit. Starting with supply contract with GM, LG Chem receives orders from global car companies.
Based on technical capability, LG Chem has been increasing its competitiveness concentrating on 'partnership' and 'speed management'. Formed with partnership with GM and Ford, LG Chem accelerated establishing new battery plant in Holland Michigan. At the groundbreaking ceremony in July 16 2010, the participation of US President Obama could assume that LG Chem firmly rooted in US market.
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< LGí™”í•™ 2ì°¨ì „ì§€ æ-¥ê¸°ì-… ì œì³¤ë‹¤> ë¨¸ë‹ˆíˆ¬ë°ì´, 2009. 08. 21
< How LG Chem Is Changing Its Formula> Business Week, Asian Business, 2005. 05. 16
<LGí™”í•™ í¬ë“œìžë™ì°¨ 2ì°¨ì „ì§€ ê³µê¸‰ì-…ì²´ë¡œ ì„ ì •> Chosun biz, 2010. 07. 14
Â· Web Sites
LG Chem, Ltd. : http://www.lgchem.com/
LG Chem Research Park : http://www.rnd.lgchem.com/
A123 : http://www.a123systems.com/
GM Volt : http://gm-volt.com/
Green Student U : http://www.greenstudentu.com/encyclopedia/green_vehicle_guide