As the dilemma for carmakers deepens over environmentally friendly vehicles, local electric car battery makers are struggling to stay afloat until demand is spurred in earnest.

The main problem for electric and hybrid vehicles is that while governments and countries are increasingly urging carmakers to put more such cars on the road, demand is tepid and costs ride too high.

At home, Hyundai Motor Group, the nation’s dominant carmaker, has not yet jumped into the business. This is working as another factor discouraging the battery makers, according to industry watchers.

LG Chem in a shaky lead

In Korea, there are three major car battery makers ― LG Chem, Samsung SDI and SK Innovation.

LG Chem, the strongest, has recently restarted its battery plant in the U.S., but only one-third of the production lines are working. At its Ochang plant, the situation is better, but unless the market lets up, the momentum will stay low, observers said.

LG Chem also has yet to strike up deals with the premium car brands, such as BMW and Mercedes-Benz. To remedy the situation, LG Group officials reportedly sat down with BMW executives for a one-on-one in Munich last week.

LG Chem’s second-quarter operating profit and sales are expected to grow by more than 20 percent and 3 percent, respectively, compared to the first quarter, according to financial data agency FnGuide.

The Korean firm also boasts a lofty global status, as global consultancy Navigant Research has stated that LG Chem and Johnson Controls are leading the EV battery market in terms of both strategy and execution.

“The lithium ion battery manufacturing space is not for the weak of heart,” said Sam Jaffe, senior research analyst with Navigant Research. “The electric vehicle market is growing slowly and the battery manufacturers are engaged in a Darwinian fight for survival.”

Samsung SDI, meanwhile, has a contract with BMW to supply the German-based carmaker with lithium ion battery cells, but that’s about it. The firm must secure more contracts, sources said.

Its rival LG Chem may not be dealing with the cream of the crop but has a wider portfolio that includes GM, Ford, Hyundai and Volvo.

Samsung was notably not included in the Navigant Research material, mainly because the firm lacks contracts with major automotive companies.

Samsung, unlike LG which now is aggressively making headway in the automobile market, also has a weak point: It has no carmaking unit, as Samsung Motors shut down in the aftermath of the Asian financial crisis.

SK Innovation catching up?

SK Innovation, the holding company of refiner SK Energy, also operates a car battery business, to the surprise of some. Despite having signed a number of conspicuous deals, the battery unit was under the radar, with even company officials conceding that it was not exactly “dynamic.”

In 2009, SK Innovation was selected to power Hyundai’s BlueOn, Kia’s Ray and a hybrid truck from Daimler Group, which hit the markets last year.

In 2011, SK Innovation was also selected to provide batteries for the SLS AMG E-Cell for Mercedes-AMG.

Last week, SK Innovation played more catch-up. On Friday, the company was said to have signed a deal launching a joint venture to manufacture electric vehicle batteries with two Chinese companies in September.

Under the deal with the state-run Beijing Automotive Industries Holding and Beijing Electronics Holding, the world’s fifth LCD maker, about 190 billion won ($166.4 million) will be invested to build a battery pack plant.

This plan can offer power to 10,000 EVs annually by the second half of 2014, SK Innovation said.

The battery pack plant will increase its capacity to 30,000 EVs by 2017.

SK Innovation expects the joint venture to grow into the biggest EV battery manufacturer in China by generating annual sales of more than 200 billion won.

However, industry watchers said it would not be easy to get a “lucrative business” going in China, since Chinese companies demand the majority stake in joint ventures.

By Kim Ji-hyun  (jemmie@heraldcorp.com)