South Korean battery companies that have hit an earnings bottom are expected to start a rebound rally on the back of Europe’s energy security logic. LG Energy Solution, Samsung SDI and SK On held their European market share in the 30 percent range in January, securing a defensive line. Europe is expected to deliver spillover gains to South Korean companies after announcing the Industrial Accelerator Act (IAA) to reduce dependence on Chinese batteries.

Hana Securities said European electric vehicle battery shipments in January 2026 rose 13 percent from a year earlier to 16.6 GWh. Shipments by the three South Korean makers came to 2.7 GWh for LG Energy Solution, up 2 percent on year, 1.5 GWh for Samsung SDI, up 5 percent, and 0.9 GWh for SK On, down 10 percent. All three lagged the overall market growth rate, but their combined share stayed in the 30 percent range. Hana Securities analysed that a need has been confirmed to secure at least 30 percent or more in non-Chinese battery procurement within Europe.

With the line held, the European market is drawing attention again. The European Commission submitted a proposal on March 4 for the Industrial Accelerator Act. The bill aims to address high energy costs in EU manufacturing and China’s low-price offensive. It would reduce China dependence within European supply chains and lower regulatory barriers for countries such as South Korea that have free trade agreements with the EU. According to Hanwha Investment & Securities, FTA partners are regarded as 'Made In EU', which includes South Korea but excludes China. Direct investment into Europe by China is expected to be restricted.

Under the proposal, requirements would be tightened when third-country investors that account for more than 40 percent of global manufacturing capacity invest more than 100 million euros in strategic sectors in Europe. They must meet at least 4 of 6 clauses, including local employment. The clauses include a cap of 49 percent on equity and voting rights, establishment of a joint venture with a European company, IP and technology transfer, local R&D investment of at least 1 percent of total revenue, a guarantee that 50 percent of employment is local, and local sourcing of at least 30 percent of components. China falls under the 40 percent rule, with a 83 percent share of the global battery market.

South Korea does not fall under the 40 percent rule and also has FTA status, excluding it from the scope of regulation. Hanwha Investment & Securities said spillover gains are expected from filling the gap left by China. Batteries had been expected to be excluded from automotive component requirements in an initial draft, but they are specified separately in the final version, which is positive. With South Korea included and China excluded from local production requirements, domestic battery and materials companies are expected to benefit. Still, low-carbon requirements are expected to increase the need for production within the EU over the long term, compared with South Korea.

◆ Energy security logic at work... South Korea expected to benefit from China curbs

Hana Securities analysed that minimal energy security logic is starting to work in Europe as well. It said if market share in the 30 percent range is maintained stably, spillover effects linked to electric vehicle market growth from 2026 could be expected.

The key is the pace of expanding local production. The IAA applies basic requirements for electric vehicles starting 6 months after it takes effect, with tougher requirements added from 3 years later. Hanwha Investment & Securities analysed that as local companies seek to minimise the risk of losing benefits, preferences for locally produced components and materials will rise, supporting companies that have entered the region.

Batteries can still qualify for benefits even if sourced from China until 3 years after the law takes effect, but local production becomes mandatory afterward. For electric vehicles, after 3 years, at least 5 core components, including battery cells, cathode materials and BMS, must be made in Europe. An industry official said short-term use of FTA status is possible, but local production investment will be decisive over the long term.