LG Chem teams up with GeelyKorean electric vehicle battery maker LG Chem established a joint venture with China’s largest carmaker Geely Auto to build an EV battery factory there, LG Chem announced Thursday.
The partnership opens the door for LG Chem to take its batteries to China. The country accounts for 50 percent of the global EV market.
Top executives from the two companies met Wednesday and signed a partnership deal at Geely’s research center in Ningbo, Zhejiang Province, China. Each company has a 50 percent stake in the joint venture, both having invested 103.4 billion won ($87 million). The venture’s name and the location of the factory have not yet been decided, LG said.
However, ground breaking for the new plant is set for late this year. The aim is to realize a production capacity of 100 gigawatt hours by late 2021. Starting from 2022, batteries will be supplied to electric vehicles released in China by Geely and its subsidiaries.
“LG Chem was looking for a way to enter the Chinese market and Geely Auto was in need of a stable battery provider - our interests met,” the local battery maker said in its statement.
Finding a local partner is a necessity for non-Chinese companies that wish to do business in the country. LG’s deal with Geely not only offers a way in, but also stable demand. Geely ranks No. 1 among Chinese carmakers, having sold 1.5 million units last year. It aims to have 90 percent of its sales come from electric vehicles by 2020.
According to forecasts from Mirae Asset Daewoo’s research center, China’s EV sales will hit 1.5 million units in 2020, further expand to 3.5 million by 2023 and 5.8 million by 2025.
“In a situation where global battery companies are pushing for joint ventures to enter China, LG’s partnership with Geely is an achievement that will help us gain an advantage,” said LG Chem President Kim Jong-hyun.
If the construction goes as planned, the factory will open before the Chinese government stops EV battery subsidies in 2021. Korean products have been excluded from subsidies since 2016, but if the subsidy policy is abolished for good they will no longer be at a disadvantage compared to Chinese EV battery makers.
Other Korean EV battery makers are also planning to invest in China. Samsung SDI is considering building a second factory in Xi’an, its second in the city and third in China. SK Innovation also announced last month that it would invest 580 billion won in a new factory in China. The company already has a plant under construction as a joint venture with Beijing Electronics.
BY SONG KYOUNG-SON [email@example.com]