Hyundai Motor, Kia poised to leverage CATL’s low-cost batteries as tariff pressures mount in US market
China’s CATL, the world’s largest electric vehicle battery juggernaut, has established a sales subsidiary in South Korea, seeking a bigger foothold on the home turf of Korean competitors as part of a strategic move to counteract the impact of Donald Trump’s unprecedented tariffs levied on Chinese goods.
Industry insiders project that the bold entry of CATL, capitalizing on its strong price competitiveness, will likely spark intense competition with Korean battery companies. However, local carmakers — namely Hyundai Motor and Kia — may benefit from the market disruption by increasing their use of Chinese batteries to mitigate the impact of US tariffs.
According to local media reports, CATL set up CATL Korea Co. in January in Gangnam, southern Seoul, upgrading its smaller local office that had been operational since 2011. The Korean unit has registered to engage in the manufacturing and sales of battery and energy storage system — or ESS — products, battery recycling, electric vehicle charging infrastructure, technological consulting and research and development, among other activities.
Partnership with Hyundai, Kia
Sources noted that CATL’s expansion into Korea is seen as a countermeasure to indirectly export lithium-ion batteries to the US, particularly for Hyundai Motor and Kia. The Chinese-made cells are primarily installed in Hyundai’s Casper Electric and Kia’s Ray EV and Niro EV — all budget models.
Although using more Chinese batteries renders Hyundai and Kia EVs ineligible for a $7,500 consumer subsidy under the US Inflation Reduction Act, experts indicate this is currently a minor concern for the Korean automakers.
"Hyundai and Kia cars have not significantly benefited from the subsidy in the first place," said Yang Min-ho, an energy engineering professor at Dankook University. "The real issue is not the IRA. It’s whether the companies can minimize the impact of tariffs by rebalancing their cost structure once they sell out their inventory by early June. This creates room for bolstering ties with CATL, which offers a wide portfolio from LFP (lithium iron phosphate) to NCM (nickel manganese cobalt) batteries."
Yang added that Hyundai and Kia could not only offset tariff pressures with CATL’s price-competitive batteries, but also use CATL’s participation in new tenders to push domestic suppliers to lower prices.
For CATL, having a sales subsidiary in Korea offers a potential strategic route to indirectly access the US market, where 145 percent tariffs now block Chinese battery exports.
Challenges for local batteries
While Hyundai’s potential alliance revamp with CATL could be advantageous, the creeping presence of the Chinese battery giant raises concerns across Korea’s EV, ESS and tech industries.
Although CATL’s LFP batteries are in the spotlight for competitive pricing, its NCM battery technology is also considered highly advanced. CATL reportedly supplies NCM cells to major automakers including Tesla, BMW, Volkswagen, Ford, Stellantis and General Motors — posing a direct challenge to Korean battery manufacturers, who have only recently begun commercializing LFP technology.
At present, CATL’s Korean unit cannot simply rebrand its ESS cells for US exports. However, industry watchers warn that it may only be a matter of time before CATL extends Korean operations to local production.
“To qualify as a Korean-made product, multiple manufacturing stages must occur within Korea. Otherwise, it could be construed as indirect dumping from China to the US,” said Kim Tae-hwang, an international trade professor at Myongji University. "If CATL builds a production base for ESS cells in Korea, it might bypass US tariffs, depending on regulatory approvals."
A researcher at a Korean battery company, who requested anonymity, added, “While domestic ESS demand is relatively low, CATL Korea’s inclusion of ESS in its business scope suggests that exporting through Korean production could be a long-term strategy.”
Tech leakage woes
Expanding manufacturing often leads to expanded R&D operations. Industry insiders fear that CATL could establish a research center in Korea and recruit talent away from Korean battery firms.
“Even if local firms sue for tech leakage via former employees, proving it is very difficult,” the researcher said. “Most confidentiality obligations expire within two to three years, further complicating enforcement.”
Meanwhile, CATL Korea is recruiting staff for its marketing, sales and human resources divisions. The subsidiary is led by co-CEOs Kwon Hyuk-jun and Han Xinjun and has capital of 600 million won ($417,000).
Kwon, who also serves as general counsel for CATL Hong Kong and chair of CATL Australia, has been instrumental in navigating global supply chain solutions for LFP and NCM cells. He is expected to manage regulatory risks and expand CATL’s Korean sales network, while Han will focus on operational growth in the region.
hyejin2@heraldcorp.com
