Korean batteries get shot at China

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Korean batteries get shot at China


Korean electric vehicle (EV) battery makers have never been able to break into the Chinese market, not because their products are inferior, but because they are excluded from tax breaks and government subsidies that Beijing applies to Chinese products.

The Chinese government’s aim was to protect and nurture its domestic EV battery market.

With the support of the government, small and midsize Chinese battery makers recorded exponential growth, making hefty investments in facilities as well.

Finally, things are starting to turn the other way.

Due to a lack of demand and excessive initial investment, small and midsize battery makers in China have either downsized or gone bankrupt.

According to China Automotive Technology and Research Center, 30 percent of Chinese EV battery makers stopped operating this year. Optimum Nano, a Chinese battery producer that used to account for 6.5 percent of the market in China, the same as Samsung SDI, suspended its manufacturing line in July.

Nanjing Yinlong New Energy, another battery producer in China that accounted for 2.2 percent of the local market, was also forced to stop after its assembly line was seized.

“Out of some 100 listed battery companies in China, 52 recorded a net loss [last year],” said Kim Su-mi, an official at the Korea Trade-Investment Promotion Agency in charge of commerce in Nanjing.

“By 2020, some 90 percent of them will face a crisis,” she added.

Last year, the Chinese government announced an initiative to boost its EV battery industry by 2020. Since then, big names such as CATL and BYD have been able to increase production by an average 46.8 percent in just one year.

The Chinese labels’ market capitalization started simultaneously as the state government excluded EVs with Korean or Japanese batteries from the list of models that received subsidies.

In China, a subsidy can be worth nearly half of the final price of an electric car. If a model is not eligible for a subsidy, it immediately loses its competitiveness in the market.

But the Chinese government renewed the policy in February and stopped giving subsidies to EVs that have a range of less than 150 kilometers (93 miles) per charge. Instead, it expanded the amount of subsidy given to electric vehicles that have a range of more than 400 kilometers per charge.

This put fledgling EV battery producers in China at risk. Those who are yet to secure sufficient technological capabilities started to die out. Financially-troubled companies including Optimum Nano and Nanjing Yinlong New Energy mostly focused on producing lithium iron phosphate batteries which have a low density of energy, meaning low-quality products.

Those with tangible technology, however, are continuing to grow. CATL and BYD, China’s top two battery makers, increased their combined market share by 20 percentage points in just one year.

Korean manufacturers are seeing this trend as an opportunity. To receive government subsidies, batteries should have a high density of energy, and there are only a few companies in China that can fulfill such requirements.

Ultimately, it means that carmakers will have to use high-density batteries made by Korean companies like LG Chem, Samsung SDI and SK Innovation or Japan’s Panasonic to get an upper hand.

If the government subsidy for EVs gets entirely eliminated by 2020, Chinese and Korean manufacturers will be able to put up a fair game.

“If only Korean companies can endure while maintaining the gap they have in terms of technology with Chinese companies, their market share will soon jump back,” said Kang Dong-jin, a researcher at Hyundai Motor Securities. “Profitability might jump back as well starting this year.”

BY MOON HEE-CHUL [jin.eunsoo@joongang.co.kr]
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