Automakers like Ford and Volkswagen are now stuck in the middle.
Although they currently don't make up a significant portion of automotive sales, electric vehicle demand is expected to surge in the coming years, and automakers like Ford, Jaguar, Volkswagen, and GM are well on their way to being ready. But it's not just about designing and building EVs, but also about getting battery suppliers lined up. Those suppliers are anxious to get those highly lucrative contracts and it appears two of the world's largest firms are going to war with one another.
According to Reuters, SK Innovation and LG Chem, both from South Korea, are currently engulfed in a massive legal battle over who will supply automakers with batteries for years to come. Here's the back story: SK Innovation beat out LG Chem for a contract to supply Volkswagen with batteries for its upcoming US-built lineup of EVs, such as the ID.4 crossover, due this spring.
Last March, SK Innovation broke ground on a $1.7 billion factory in the US state of Georgia, ideally located to transport batteries to neighboring Tennessee where the VWs are built. LG Chem also wanted that contract but instead of biting the bullet and accepting the loss, it sued SKI Innovation in a US court last April, accusing it of misappropriating trade secrets. This month, the two companies are now suing each other in the US over battery patent infringements. These two feuding companies are now basically threatening the supply of batteries and, therefore, potentially delaying the launches of EVs by major automakers.
The US court findings, seen by Reuters, reveal how the two firms are trying to stop each other from importing and selling EV batteries specifically for VW, the Chevrolet Bolt, Ford's future EV pickup trucks, Jaguar I-Pace, Audi e-tron, and the Kia Niro. Both companies deny the allegations against them, not surprisingly.
"Whoever loses the fight would suffer a fatal blow, unless the two reach a settlement. This will also be a setback for automakers," said Cho Jae-phil, a professor at Ulsan National Institute of Science and Technology.
Meanwhile, automakers are hoping the two resolve their issues out of court. Given projected future EV demand, there should be plenty of business for more than one supplier. This conflict is not expected to affect automakers in the short-term, but they are closely monitoring the situation. In one court filing, LG Chem accuses its domestic rival of poaching employees to work on batteries for VW's new MEB EV architecture. SK Innovation only won the VW contract, it is alleged because it misappropriated trade secrets. SK Innovation denies this, claiming the employees signed non-disclosure agreements.
Hopefully, this will all be settled without litigation in the near future. In fact, VW is worried there won't be enough batteries for all of the EVs it aims to launch within the next five years. In other words, there's plenty of business to go around.