[Edaily Reporter Song Jae-min] As the domestic electric vehicle (EV) market shows an unexpected recovery, expectations are rising for the battery industry. Amid growing concerns that the EV chasm (a temporary stagnation in demand) will persist due to the slowdown in the U.S. EV market and the reduction of subsidies, analysts suggest that the increase in domestic EV sales could help LG Energy Solution and SK On defend their earnings.

According to industry sources on the 19th, expectations for expanding battery demand are rising as domestic EV sales have surged recently. In a recent report, KB Securities projected that domestic demand for EV batteries would increase from 17.5 gigawatt-hours (GWh) last year to between 30.9 and 38.9 GWh this year. LG Energy Solution is estimated to hold approximately 45% of the domestic EV battery market share, while SK On holds about 25%.

This trend is driven by a faster-than-expected recovery in the domestic electric vehicle market. According to KB Securities’ analysis of MarkLines data, domestic EV sales from January to May this year reached 155,000 units, a 122% increase compared to the same period last year. The EV penetration rate also rose from 12.9% last year to 22.6% this year. If the current sales trend continues, annual sales are projected to exceed 380,000 units.

Industry observers attribute the sales increase to falling EV prices, rising international oil prices, and the government’s strengthened policies to promote eco-friendly vehicles. There is also a growing consensus that the domestic EV market, which had stagnated at around the mid-100,000-unit range for several years, has returned to a growth trajectory.

The battery industry has long been concerned about the impact of slowing demand in the U.S. market. In the U.S., sales growth has slowed since the expiration of EV purchase subsidies last October. With the domestic market showing a sharp recovery, analysts suggest that the domestic market could partially offset the decline in U.S. EV demand. As of April this year, domestic EV sales had expanded to 52% of U.S. sales levels.

Industry observers are watching for increases in battery shipments and improvements in capacity utilization rates at LG Energy Solution and SK On if the strong domestic EV sales continue. In particular, there is interest in whether battery manufacturers, which had been highly dependent on the U.S. market, will be able to reduce some of the volatility in their performance through the recovery of the domestic market.

A battery industry official stated, “While the domestic market’s share is not overwhelmingly large, the recent sales growth is clearly a positive sign,” adding, “Amid ongoing uncertainty in the U.S. and European markets, expanding domestic demand could help battery manufacturers improve their capacity utilization rates and profitability.”