Tesla’s exit from ESS mar­ket to ben­e­fit LG, Sam­sung

The Korea Times - - BUSINESS - By Baek Byung-yeul baekby@ko­re­atimes.co.kr

Elec­tric ve­hi­cle (EV) gi­ant Tesla has scrapped its plans to launch en­ergy stor­age sys­tems (ESS) in Korea due to de­lays in cer­ti­fi­ca­tion pro­cesses and wors­en­ing mar­ket con­di­tions caused by the coro­n­avirus pan­demic, ac­cord­ing to in­dus­try sources.

They said Tesla sus­pended its on­go­ing work to re­ceive govern­ment cer­ti­fi­ca­tion for its ESS re­cently and of­fered its em­ploy­ees work­ing in the ESS busi­ness long-term leave, which can be seen as a move with­draw­ing from the ESS mar­ket in Korea.

Tesla an­nounced its en­try into Korea’s ESS mar­ket in 2018. At the time, the an­nounce­ment was widely seen as a real threat to lo­cal play­ers such as LG Chem and Sam­sung SDI.

In­dus­try of­fi­cials said Tesla’s de­ci­sion to exit the lo­cal ESS mar­ket would ben­e­fit these lo­cal mak­ers, which have been strug­gling with safety is­sues since 2017 due to a se­ries of fires, as the with­drawal would re­lieve ex­ces­sive com­pe­ti­tion.

“Though the ESS mar­ket is still in its early stages, ESS mak­ers are fiercely com­pet­ing with each other for the first-mover ad­van­tage in the sec­tor. When Tesla an­nounced its pos­si­ble en­try in the Korean ESS mar­ket, many ex­pressed con­cerns that the en­try would deal a blow to the lo­cal ESS ecosys­tem. How­ever, the with­drawal could mit­i­gate such com­pe­ti­tion risks and help lo­cal play­ers to fo­cus more on selling their prod­ucts over­seas, in coun­tries that have big­ger mar­kets than here,” an in­dus­try of­fi­cial said.

With more coun­tries mov­ing for­ward with ini­tia­tives to gen­er­ate elec­tric­ity us­ing re­new­able en­ergy re­sources such as so­lar, wind, geo­ther­mal and hy­dro­elec­tric en­ergy, the ESS busi­ness looks good on mul­ti­ple fronts.

Ac­cord­ing to mar­ket re­searcher Lux Re­search, the global ESS mar­ket was es­ti­mated at $9.1 bil­lion and is ex­pected to grow to $111.8 bil­lion in 2035.

Among cat­e­gories of the ESS mar­ket, stor­age for res­i­den­tial pur­poses could have an an­nual growth rate of 76 per­cent over the next three years.

ESSs more prof­itable than EV bat­ter­ies

While Tesla is bet­ter known as the world’s top EV man­u­fac­turer, it is fo­cus­ing more on ex­pand­ing its ca­pac­ity to pro­duce bat­tery packs and ESS, such as Pow­er­wall for res­i­den­tial use and Powerpack for in­dus­trial use.

Com­pared to EVs, ESSs are much more prof­itable as they hold more bat­ter­ies than EVs. Tesla is aim­ing to go be­yond the role of EV maker as it cre­ates a busi­ness ecosys­tem based on bat­ter­ies.

When the com­pany an­nounced its bid to en­ter the Korean mar­ket, in­dus­try of­fi­cials said Tesla was seiz­ing the op­por­tu­nity to en­hance the im­age of its bat­tery prod­ucts be­cause there were no re­ports of its ESS prod­ucts catch­ing fire.

Tesla launched a sep­a­rate ESS busi­ness unit here and planned to test op­er­ate its Powerpack prod­ucts at lo­cal re­tail gi­ant Shin­segae’s Starfield shop­ping malls.

The ca­pac­i­ties of its ESS prod­ucts are ex­pected to range from 100 kilo­watt-hours to 100 megawatt-hours.

To achieve the goal, the com­pany’s Korean unit ac­quired a Korea Cer­ti­fi­ca­tion Mark (KC) from the Korean Agency for Tech­nol­ogy and Stan­dards (KATS) for its ESS in early 2020 but it has failed to win an in­dus­try stan­dard au­then­ti­ca­tion from the Korea Bat­tery In­dus­try As­so­ci­a­tion (KBIA), which is an­other core cer­ti­fi­ca­tion to do ESS busi­ness here.

The com­pany is known to have failed to win the KBIA cer­ti­fi­ca­tion as there is no proper pro­ce­dural sys­tem for its prod­ucts.

While Korean firms man­u­fac­ture each com­po­nent of ESS prod­ucts sep­a­rately and as­sem­ble them at the in­stal­la­tion lo­ca­tions, Tesla’s ESS prod­uct is an all-in-one prod­uct that is com­prised of bat­tery and power con­di­tion­ing sys­tems that pro­vide power con­ver­sion and en­ergy man­age­ment.

Though lo­cal ESS mak­ers could avoid lo­cal com­pe­ti­tion with Tesla in the short term, it re­mains to be seen whether they can re­tain their lead­ing po­si­tions in the global ESS mar­ket, an­a­lysts said.

Al­though Sam­sung and LG’s tech­nol­ogy af­fil­i­ates showed a com­bined mar­ket share of over 70 per­cent un­til 2018, their pres­ence has ta­pered off since they have been em­broiled in safety con­cerns af­ter a se­ries of fires in­volv­ing their ESS prod­ucts.

Af­ter the fire is­sue broke out, their com­bined mar­ket share dropped to around 60 per­cent due to the rise of Chi­nese ri­vals such as BYD and CATL.

Cap­tured from Tesla web­page

Tesla’s Powerpack en­ergy stor­age sys­tem

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