South Korean battery suppliers are again gearing up to win orders from Chinese electric vehicle (EV) makers, according to recent reporting by BusinessKorea. With China planning to terminate subsidies for new energy vehicles (including EVs) by 2020, South Korean battery suppliers are now anticipating a more level playing field against Chinese competitors. Earlier in 2016, the Chinese government had excluded EVs equipped with South Korean batteries from the official subsidy list, causing a massive drop in EV battery orders going to the South Korean suppliers. However, the impending end of the subsidy program means that the Chinese EV makers are likely to consider using batteries from foreign suppliers. Consequently, South Korean battery suppliers are making investments in raising their production.
According to BusinessKorea, LG Chem, Samsung SDI, and SK Innovation were originally the three major South Korean suppliers of EV batteries to the Chinese market. To support the development of the domestic battery industry, the Chinese government purposely excluded vehicles with South Korean batteries from its subsidy list in 2016. This led to a massive loss of orders for the South Korean suppliers because the Chinese EV makers wanted keep their models on the subsidy list.
Because the subsidy program will end at the start of 2020, South Korean industry analysts expect that their country’s battery suppliers will quickly regain their market positions in China because local EV makers have always appreciated the quality and price competitiveness of South Korean battery imports. Sources in the industry have also revealed that Chinese car makers are already negotiating under the table with South Korean battery suppliers for future shipments.
Despite experiencing setbacks, the three major South Korean suppliers have been maintaining their presence in China and awaiting for future opportunities. In 2016, SK Innovation suspended the construction of the battery plant that was a joint venture with Chinese capital. However, SK Innovation later established a Chinese subsidiary in China called SK Battery China Holdings and recently renamed it “SK Blue Dragon Energy.” SK Innovation has also decided to invest KRW 86.4 billion into the Chinese subsidiary. As for the other two suppliers, Samsung SDI stated in its first-quarter report that it is preparing to take advantage of the end of the Chinese subsidy in 2020. LG Chem, too, announced that it is going to invest KRW 239.4 billion in a joint venture to build a plant in China for the manufacturing of battery materials.
(The credit of the image at the top of the article goes to Pixabay.)