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China to grant subsidies on LG, SK's EV batteries

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An SK Innovation engineer looks at a battery cell manufacturing line at the company's plant in Seosan, South Chungcheong Province, in this file photo. Courtesy of SK Innovation
An SK Innovation engineer looks at a battery cell manufacturing line at the company's plant in Seosan, South Chungcheong Province, in this file photo. Courtesy of SK Innovation

By Nam Hyun-woo

China has included electric vehicles (EVs) powered by LG Chem and SK Innovation's batteries on a list of vehicles eligible for its government subsidies, signaling that it would lift disadvantages on Korean battery makers after three years of regulations, according to industry analysts, Tuesday.

They said this paves the way for Korean battery makers to compete fairly with Chinese rivals amid the country's initiative to expand its EV market.

According to China's Ministry of Industry and Information Technology, it included the E-Class plug-in hybrid EV (PHEV) by Beijing Benz Automotive and the Tesla Model 3 on its 11th New Energy Vehicle Promotion and Application Recommended Vehicles, announced on Dec. 6.

The E-Class PHEV is powered by SK Innovation's battery, and the battery for the Model 3 is supplied by both LG Chem and Panasonic.

After reviewing the listed vehicles for approximately 40 days, Chinese authorities will finally approve subsidies for a number of vehicles, according to industry officials.

If the two cars are selected as the subject of subsidies, it will become the first case of vehicles having Korean batteries receiving the state subsidies since January 2017. In March this year, five EV models equipped with LG Chem and Samsung SDI batteries made it into the list, but failed to get the final approval from the authorities.

China has been giving "disadvantages" to Korean battery producers since 2017 by only offering subsidies for certain EVs. It was interpreted as a bid to nurture its own battery makers, but at the same time an apparent retaliation against Korean industries after the two countries' relations turned sour amid diplomatic friction over deploying a U.S. Terminal High Altitude Area Defense (THAAD) system in Korea.

Following the measures, LG Chem and Samsung SDI saw the operation rates of their battery plants in China fall, at one point dropping below 50 percent.

Industry officials said they have high hopes for getting the subsidies this time, but don't see this as a huge opportunity for growth in China, as the country is moving to abolish subsidies on EVs as early as 2021.

"It is welcome news for battery makers, but we don't want to exaggerate the impact of subsidies, because China is expected to end the subsidies in 2021," an SK Innovation official said.

Analysts also shared similar opinions. According to Hana Financial Investment analyst Kim Hyun-soo, China has lowered the subsidies for EVs running 250 kilometers to 300 kilometers on a single charge to 17,000 yuan ($2,400) this year, down 70 percent from 55,000 in 2016.

"However, investors should not interpret this as China backing off from its EV drive, because the ministry has raised its target EV share in 2025 to 25 percent from 20 percent," Kim said. "Given China is expecting a trickle-down effect from the EV market, Korean battery makers' enhanced presence is a favorable sign for investors."



Nam Hyun-woo namhw@koreatimes.co.kr


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