Frequent battery safety LG is deeply mired in recall vortex

LG Chem's Energy Storage System (ESS) has once again announced a recall due to the risk of battery fire. According to foreign media reports, LG Energy Australia, a subsidiary of LG Chem, announced the recall of some of its RESU10H residential energy storage systems (ESS) and battery packs in Australia, involving approximately 1,800 battery systems. This batch of recalled ESSs used a batch of ternary batteries produced by LG Energy between March 2017 and September 2018. The recall notice pointed out that the defect was 'the battery may overheat and catch fire.' In fact, this is not the first time that LG Energy’s ESS products have been recalled overseas due to battery safety issues. At the end of 2020, LG Energy announced the recall of some of its Resu10H household energy storage system products in the United States due to the risk of heat and fire caused by the internal batteries. LG Energy confirmed that the energy storage system product had five fire accidents in the United States. The recalled energy storage system is equipped with a batch of batteries produced by LG in 2017-2018. However, LG Chem has not yet responded to the cause of the fire. It is worth noting that from August 2017 to October 2019, there were 27 ESS fire accidents in South Korea, of which 17 accidents were installed with lithium-ion batteries produced by LG Energy. The reasons for the fires in the above-mentioned series of energy storage systems basically point to the cell level, which shows that the cells produced by LG Energy have hidden safety hazards and have not been significantly improved in the later period. In October last year, Hyundai Motor announced a global recall of 77,000 KONA electric vehicles because defects in the production process of the high-voltage batteries onboard may cause short circuits or risk of fire. The solution provided by Hyundai and LG was to update the battery management system of the recalled vehicles but did not replace the battery system. However, in January 2021, a South Korean KONA electric car that had just been recalled and updated its battery management system caught fire again. As a result, consumers are more and more worried about battery safety issues. Under this circumstance, Hyundai Motor announced that it will recall about 82,000 electric vehicles including the KONA and IONIQ electric vehicles worldwide from March 29. Hyundai will replace the batteries for the above-mentioned recalled vehicles free of charge. The bag replaces the LG battery originally equipped. According to Hyundai Motor, the cost of the recall will be as high as US$900 million (approximately RMB 5.8 billion), including the cost of the first recall of 38.9 billion won. However, Hyundai and battery supplier LG Energy are negotiating how to share the cost of battery replacement, but no agreement has been reached so far. So far, Hyundai KONA’s global sales of electric vehicles have exceeded 160,000, and 15 fire accidents have occurred worldwide, all of which are equipped with LG batteries. However, in response to Hyundai’s recall of the battery’s risk of fire, LG Energy denied that its batteries had quality problems. The Ministry of Land, Infrastructure and Transport of South Korea stated that some batteries were found to be internal short-circuits caused by defects in the battery pack and eventually caused a fire, but the fire did not occur again during the test. Based on this, LG argued that the defects in the battery pack were not the direct cause of the fire. Nevertheless, a series of fire accidents will undoubtedly have a great impact on LG Energy's battery brand image, market development and revenue and profit. On the one hand, LG Energy’s customers include a large number of international OEMs such as Tesla, Hyundai, Daimler, Volkswagen, and General Motors. The above-mentioned OEMs may impose higher requirements on LG's power lithium battery products or a longer verification period for safety reasons, or even cancel the supply cooperation with them, or cause a fatal blow to LG Energy's power business. On the other hand, the above-mentioned recall accident will also bring a heavy burden of recall expenses to LG Energy, resulting in a substantial decline in LG Energy's battery profitability and even another loss.