Tesla ESS Grows as Korean Firms Decline

Accounting for 72.4% of the industry, seven of the top ten global battery manufacturers hail from China, while CATL and BYD commanded 54.3% of global EV battery usage in the first half of 2026.

Even when excluding the Chinese domestic market, their combined presence remained substantial at 44.1%, with seven out of the top ten global battery manufacturers being Chinese companies, accounting for 72.4% of the total market.

The combined market share of LG Energy Solution, SK On, and Samsung SDI in the electric vehicle battery market outside of China dropped to 27.6% in the first half of 2026.

This figure represents a significant decrease of 9.6 percentage points from the 37.2% recorded in the previous year, indicating that Chinese firms are outstripping Korean counterparts in cell production growth and weakening their market position.

Global lithium-ion energy storage system (ESS) shipments surged to 195.5 GWh in the first quarter of 2026, marking a 78% increase year-over-year, with grid-scale projects accounting for 74.6% or 145.9 GWh of this growth.

While Chinese companies dominate 83.3% of the cell manufacturing market, their share in overall system shipments drops to approximately 60%, highlighting that the competitive standards evolve from cell production to broader system integration encompassing battery PCS, thermal management, control, installation, and services, where Tesla holds a key advantage by bundling hardware, software, and services.

Tesla deployed 13.5 GWh of energy storage in the second quarter of 2026, representing a 41% increase compared to the same period last year.

Despite this significant growth in deployment volume, the quarterly gross profit margin for energy products declined to 20.4% in Q2 2026 from 30.3% in Q2 2025, emphasizing that increased deployment volume does not automatically translate to improved profitability and requires separate evaluation.

Tesla's Megapack integrates battery modules, inverters, and thermal management into a single cohesive system, distinguishing itself from competitors who primarily offer standalone components.

The company further enhances its offerings with Powerwall/Powerhub for monitoring and control, and AutoBidder for automated market participation, addressing customer priorities such as installation timing, grid connection speed, failure responsibility, and potential revenue generation over just the cell price.

Tesla's competitive advantage extends beyond merely utilizing multiple cell suppliers and its internal cell production plans; it lies in its robust ability to integrate cells into advanced system software and comprehensive field operations.

While Chinese firms demonstrate significant strength in cell manufacturing, Tesla's growth in integrated systems represents a different, yet complementary, layer within the overall value chain, driven by factors such as a large domestic market, LFP battery portfolio, raw material control, and strong project execution capabilities.

LG Energy Solution maintained the largest share among Korean firms at 16.7% but its usage growth lagged behind the overall market, while SK On's market share was 7%, with usage decreasing by 6.7%.

Samsung SDI recorded the largest decline among the three, with its market share falling to 3.9% and usage decreasing by 29%.

Domestic content requirements and U.S. tax credits like the 45X, 45Y, and 48 programs influence deployment, prompting LG Energy Solution to target over 90 GWh in new ESS orders and 60 GWh of production capacity with an 80% focus on North America.

Samsung SDI is also concentrating on uninterruptible power supply (UPS), battery backup unit (BBU), and utility segments, intending to commence mass production of prismatic LFP batteries in the United States, aligning with the shift towards comprehensive ESS offerings.

US policy incentives, including 45X, 45Y, and 48 tax credits, along with domestic content requirements, heavily influence ESS deployment, driving customer priorities beyond mere cell pricing to include local assembly, certification, long-term service, and financing.

Success in the sector now hinges on connecting cell supply with power conversion systems, thermal management, and power market revenue, as the industry moves past competition based solely on cell pricing.

The overall evaluation will also consider how effectively storage devices are connected to power market revenue, with the outlook for Korean companies depending on their ability to convert integrated LFP systems into tangible operational margins, even as Tesla's significant 13.5 GWh volume does not automatically guarantee dominance in profitability.