The automakers want more sharing of battery technology, but the South Korean suppliers are unwilling to part with their trade secrets, according to people familiar with the matter.

The battery manufacturers are concerned that proprietary information may leak to rivals as the automakers deal with more suppliers.

General Motors has asked its partner, LG Energy Solution, to share some battery technologies, while Ford Motor proposed technology sharing arrangements in joint-venture negotiations with SK On, SK Innovation’s battery-making unit, according to South Korean government and industry sources.

GM and LG have been building plants since they announced a joint venture in December 2019, while Ford concluded deals with its South Korean partners last year.

Including partnerships that Dutch-based carmaker Stellantis has with LG and Samsung, there are seven battery plants being built in North America by US-South Korean joint ventures.

As GM also has its own battery plant, LG Energy fears its trade secrets could be purloined by the American carmaker. SK, on the other hand, worries its information will find its way to rivals because Ford also buys batteries from other suppliers.

The South Korean government jealously guards what it calls “national core technologies. These include know-how in semiconductors, organic electroluminescent panels, batteries, steel, shipbuilding and other areas.

The country’s parliament, the National Assembly, recently passed a law aimed at protecting these strategic industries. Its industrial policy applies overseas joint-venture plants as well, and South Korean authorities have voiced concern about the US companies’ demand for technology sharing.

Although the top three South Korean battery manufacturers — LG, SK and Samsung — have teamed up with the big US automakers, they supply batteries to carmakers around the world. They hold patents on specific technologies to keep them in “black boxes”, away from prying eyes.

The GM-LG and Ford-SK teams are placing priority on getting their battery plants up and running quickly. SK announced a deal with Ford and a leading Turkish conglomerate on March 14 to build an automotive battery plant near the Turkish capital, Ankara. But concerns remain about the security of the technology.

For the automakers, the joint ventures offer a stable supply of battery systems, which make up around 30% of an EV’s production cost.

Improvements in battery technology are indispensable to ensure the safety of EVs and extend their range. Automakers are working hard to come up with advanced batteries by working with battery manufacturers that hold the key patents.

Business deals involving batteries fall outside the auto industry’s conventional pyramid structure, where the automakers sit at the top. With big automakers working to shift quickly to EVs, the shortage of batteries gives battery manufacturers more leverage.

GM and other automakers, such as Volkswagen and Toyota Motor, meanwhile, are stepping up efforts to produce their own batteries.

Which option the automakers choose when it comes to batteries — production in house, procurement from outside suppliers or joint ventures with battery manufacturers — depends on things like gaps in technology and the need to produce at scale.

“It is difficult for automakers to produce batteries on their own because of the huge technological patent fees and research and development costs,” said Kwon Young-soo, CEO of LG Energy.

“Automakers are shifting toward joint ventures from in-house production as we propose joint plants for stable procurement” of batteries.

LG Energy’s order backlog is estimated at over US$200 billion due to higher demand worldwide. In addition, US and European automakers have grown more reliant on the top three South Korean battery suppliers against a backdrop of friction between the US and China.

SK and Samsung are increasing their capital spending, foreseeing medium- and long-term demand growth.

But technology leaks from joint ventures are a big concern for the battery makers, given past experience. If the tug of war over technology sharing continues, the US-South Korea partnerships on battery production may come to a standstill.

In that event, Chinese manufacturers, with their large shares in the markets for both EVs and automotive batteries, will surely profit at their rivals’ expense.