|Seen is LG Chem's battery plant in Nanjing, China. / Courtesy of LG Chem|
By Baek Byung-yeul
LG Chem, Samsung SDI, SK Innovation and other battery makers for electric vehicles (EVs) here are attracting strong attention from investors and industry officials as to whether they can benefit from their increasingly financially-troubled Chinese rivals.
Korean companies have refrained from publically speaking about the effects of China's decision to phase out state subsidies given to Chinese EV battery makers by 2020, which has put further downward pressure on the already cash-strapped producers on the mainland.
But most analysts here say Korean EV battery makers, which have been unable to receive the EV battery subsidies on the mainland, will benefit from China's subsidy phase-out and regain an edge over their struggling Chinese competitors.
According to industry officials Monday, China's No.3 EV battery maker OptimumNano Energy said in early July that it would suspend its operations for six months because of a shortage of revolving funds.
Furthermore, production lines of Nanjing Yinlong New Energy were placed under custody in July and Shenzhen-based maker Roogrow also announced its bankruptcy at the end of July.
This is because the Chinese government implemented a new subsidy policy starting June 12 to encourage the development of EVs with longer ranges and more battery pack densities.
As the revised policy increased barriers for applying the subsidies, EV makers have been forced to delay their payments to battery suppliers.
While EV makers have been delaying payments to their suppliers, many battery makers in China have continued manufacturing and shipping batteries to car makers, which apparently increases the burden on their finances, according to a recent report from Taiwan-based DigiTimes.
Big players in the EV battery market in China are also struggling. CATL, the world's largest EV battery maker, has seen its operating profits decrease significantly only a few months after the company made its debut on China's stock market.
BYD, the No.2 battery maker in China, announced Aug. 29 that it saw its operating profit fall 72.2 percent in the first half of this year, compared with the same period last year. The company said it was mainly due to a change in subsidy policy.
Industry watchers said the changed subsidy policy of the Chinese government has led to a reshuffle of Chinese battery makers and this could be a good sign for Korean lithium-ion manufacturers. As China had excluded EVs equipped with Korean firms' batteries from a subsidy list since last year, Korean manufacturers have been blocked from doing business in China.
"The Chinese EV battery market has been flooded with a slew of minor companies. The changed subsidy policy may force the Chinese firms to merge into a few players that will have competitive advantages in battery production technology," said an industry watcher who refused to be named.
Stating there will be no immediate change for Korean firms, the industry watcher said it could be an opportunity for Korean firms as the Chinese government is looking to end its subsidy program by 2020.
"Korean battery makers have been developing their technologies in the EV battery market though they are not available to conduct business in China," he said.
LG Chem, Samsung SDI and SK Innovation said there will be no change for them before the expiration of China's subsidy program.
LG Chem said it is focusing more on its energy storage system (ESS) business and exporting batteries for EVs in the European car market. "China is an important market for us. Currently we are having trouble conducting business there but we are taking a long term view towards this market as China has the biggest EV market in the world," an LG Chem spokesman said.
SK Innovation has been focusing on establishing a joint venture with Chinese firms. SK Innovation, SK Group's energy affiliate, already established a joint venture BESK with Chinese companies in 2013. The joint venture, in which SK Innovation invested 163 billion won ($147 million), has a battery pack production line in Beijing.
SK Innovation announced on Aug. 24 that it began construction to build a battery plant for EVs in Changzhou, Jiangsu Province, with its Chinese partners, Beijing Automotive Group and Beijing Electronics. SK said the Changzhou plant will be the first large-scale battery plant in collaboration with a Chinese EV manufacturer and a foreign battery maker.