EV battery makers back on China subsidy list

LG Chem and SK Innovation have been included once again on the Chinese government’s list of companies eligible for electric vehicle (EV) battery subsidies.

Their return to the list comes nearly three years after they were removed from the list in late 2016 as China sought to promote its domestic battery industry.

The Chinese Ministry of Industry and Information Technology recently placed the Tesla Model 3 and the Mercedes-Benz E-Class plug-in hybrid vehicle on the list of recommended models for state subsidies. The list is awaiting final approval by the Chinese government.

LG Chem is reportedly contracted to supply its electric battery cells for Tesla Model 3s manufactured in China, while Mercedes-Benz uses SK Innovation products for the E-Class model.

In June this year, China scrapped its list of recommended battery suppliers, a decision seen by foreign manufacturers as signaling a possible opening of the market.

The list, which excluded foreign firms, was published in 2015 as a means for the Chinese government to close its doors to foreign participants and support the development of its EV battery industry.

The re-inclusion could represent an opportunity for the Korean companies to increase their presence in the Chinese market, but analysts say that boost will not last long, as the Chinese government is gradually removing its subsidy program as a whole.

“The amount of subsidies has fallen 70 percent over the past three years, and in 2020, that could fall even more to almost nothing in 2020,” said Kim Hyun-soo, an analyst at Hana Financial Investment.

Still, analysts also say the inclusion is an opening for Korean battery makers interested in the Chinese market.

China aims to have 25 percent of all cars sold electric by 2025. The average price per electric vehicle has been steadily falling over the years, and some believe that the popularity of such eco-friendly vehicles would gain momentum when a more affordable electric car is introduced.

“If an electric vehicle priced around $30,000 comes to market and not in need of any government subsidy support, the share of electric cars will automatically increase,” Kim added. “It is positive that Korean electric vehicle battery makers have earned a chance to enter the Chinese market as the price of electric cars fall.”

BY KO JUN-TAE [ko.juntae@joongang.co.kr]