On January 20, according to Nikkei reports, South Korea's LG Energy aims to seize the crown of electric vehicle batteries from China's Ningde era, plans to expand production capacity in six countries, and use its likely record stock market debut proceeds to develop cutting-edge power batteries.

LG Energy and parent company LG Chem aim to raise 12.75 trillion won ($10.7 billion) through the former's Jan. 27 IPO. That's more than double the current record of 4.9 trillion won held by Samsung Life in South Korea in 2010. If successful, this would give LG Energy a valuation of about 70 trillion won.

The mega-IPO of the world's second-largest maker of electric vehicle batteries has set off a frenzy in South Korea. Institutional investors outbid the stock supply by 2,000 to 1. As demand for electric vehicle batteries surges, some observers believe LG Energy's market value is on track to hit the 200 trillion won mark.

At an event on Jan. 10, LG Energy CEO Kwon Young-soo said the company would increase its battery capacity by 2.6 times to 400 GWh within three years.

The company's backlog jumped to 250 trillion won in the three months to the end of December, from 160 trillion won at the end of June. Currently, LG Energy supplies batteries to automakers such as Volkswagen, Tesla and Audi, as well as an alliance of three, Renault, Nissan and Mitsubishi Motors. Although the contracts are considered long-term, the company still needs to ramp up production capacity to deliver on the promise.

Specifically, expansion plans are already underway in six countries. LG Energy will invest 5.6 trillion won to build a joint venture factory with General Motors in the United States, 1.4 trillion won to build its own factory in Poland, 1.2 trillion won in China and 64.5 billion won in South Korea. In addition, it will build joint factories with Stellantis in Canada and Hyundai Motor in Indonesia. Obviously, some of the proceeds from LG Energy's IPO will be used for these massive investments.

Meanwhile, LG Energy is working on a cutting-edge solid-state battery, as well as developing a lightweight lithium-sulfur battery that could be used in drones and flying taxis.

The competition for EV battery market share is fierce. According to Tokyo-based Techno Systems Research, CATL ranked first in the world with a 25.3% share in 2020. LG Energy is close behind with a market share of 22.7%.

"We are ahead of CATL in terms of material technology and intellectual property," Kwon said. As European and U.S. automakers switch to electric vehicles, their orders will continue to grow. Kwon sees CATL's high reliance on Chinese customers as a weakness. "We are leading the way in reaching global customers in Europe and the US."

Although it has international customers such as Tesla, BMW, Toyota and Honda, CATL still generates 80% of its revenue from China. This year, CATL will open a factory in Europe to diversify geographically. But because of differences between China and the United States, "it is difficult for CATL to build deep relationships with Western companies, such as joint ventures," said a securities analyst.

Of course, LG Energy faces its own challenges, including massive recalls in 2020 and 2021 that have led to fiscal deficits. Since battery systems make up about 30 percent of the cost of an electric vehicle, the cost of replacing them can snowball.

Quality control will also be an ongoing concern for the expansion of international production. LG Energy has joined forces with Germany's Siemens to transform its factories into smart factories. The battery quality will be checked by using artificial intelligence and big data-driven machine learning production techniques.

Currently, parent company LG Chem holds 82% of LG Energy. But the former's growth strategy will be tested after LG Energy goes public. LG Chem's market value is now 46 trillion won, well below the value of its stake in LG Energy. That makes it critical for the company to chart a path beyond batteries.

Undoubtedly, the debut of LG Energy will usher in more intense market competition in the electric vehicle battery industry.

CATL expects to have more than 670 GWh of capacity by 2025, exceeding LG Energy's planned 400 GWh. In addition, CATL said in a filing that it needed to add 430 GWh of capacity and estimated that each additional GWh of capacity would cost at least 300 million yuan ($47 million).