Korean battery firms up investment in China

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Korean battery firms up investment in China

Samsung SDI's battery manufacturing plant in Xi'an, China / Courtesy of Samsung SDI

By Baek Byung-yeul

Samsung SDI, LG Chem and SK Innovation are expanding investments in their electric vehicle (EV) battery businesses in China in preparation for the Chinese government removing a trade barrier, industry officials said Sunday.

With more EVs expected to hit the roads, EV-related industries have been witnessing an explosive demand. Among the biggest EV markets in the world, China is the most important for battery suppliers as the country accounts for more than half of the entire EV market.

Korean battery makers have been struggling in China because EVs using their batteries have been unable to receive government subsidies since 2016. But the country is scheduled to phase out the subsidy program after 2020.

Samsung SDI, which had a 50 percent stake in Samsung SDI-ARN (Xi'an) Power Battery, acquired an additional 15 percent stake in the battery manufacturing joint venture recently to increase its stake to 65 percent.

The battery maker established the joint venture along with Anqing Ring New Group and Xi'an Gaoke Group in 2014. According to its semi-annual report, it acquired the 15 percent stake from Xi'an Gaoke for 41 billion won ($34 million) on July 25.

This can be interpreted as a pre-emptive move before it expands investment in China ahead of the subsidy phase-out as the company has been reportedly mulling 1 trillion won in investment to construct an addition plant there.

"Samsung SDI acquired the additional stake in order to strengthen management control of the joint venture," a company official said.

Samsung SDI has been pouring investment into China. In 2018, the company invested 231.3 billion won in another battery manufacturing subsidiary in Tianjin, raising its stake from 50 percent to 80 percent. These kinds of moves could be possible as the Chinese government last year relaxed the ownership limit of foreign car companies, which had been restricted to 50 percent.

Korean battery suppliers have been included in the top 10 list of the global battery makers in terms of EV battery supply to end consumers, showing their presences in Europe, North America and other places.

To capture the lucrative Chinese EV battery market, LG Chem also formed a joint venture in June with Geely, a top Chinese automotive group, to construct a battery manufacturing plant in Ningbo.

For the 50-50 joint venture, the two companies will invest $94 million each for the plant which will be capable of producing 10 gigawatt hours a year.

Expecting that China will abolish the state subsidy to EV makers at the end of 2020 or early 2021, Shin Hak-cheol, vice chairman of LG Chem told reporters in July that establishing the joint venture is a move "to secure a favorable position in China, which accounts for 51 percent of the global EV market."

SK Innovation is also accelerating to expand its EV battery business in China as it announced in May that it would construct the second battery production plant in Changzhou, investing 579.9 billion won, even though its first battery plant is still under construction.

Under a joint venture with Beijing Electronics Holding and BAIC Motor, SK Innovation began constructing the Changzhou plant in August 2018. The first plant is expected to begin operations in the first half of 2020.


Samsung SDI's battery manufacturing plant in Xi'an, China / Courtesy of Samsung SDI

By Baek Byung-yeul

Samsung SDI, LG Chem and SK Innovation are expanding investments in their electric vehicle (EV) battery businesses in China in preparation for the Chinese government removing a trade barrier, industry officials said Sunday.

With more EVs expected to hit the roads, EV-related industries have been witnessing an explosive demand. Among the biggest EV markets in the world, China is the most important for battery suppliers as the country accounts for more than half of the entire EV market.

Korean battery makers have been struggling in China because EVs using their batteries have been unable to receive government subsidies since 2016. But the country is scheduled to phase out the subsidy program after 2020.

Samsung SDI, which had a 50 percent stake in Samsung SDI-ARN (Xi'an) Power Battery, acquired an additional 15 percent stake in the battery manufacturing joint venture recently to increase its stake to 65 percent.

The battery maker established the joint venture along with Anqing Ring New Group and Xi'an Gaoke Group in 2014. According to its semi-annual report, it acquired the 15 percent stake from Xi'an Gaoke for 41 billion won ($34 million) on July 25.

This can be interpreted as a pre-emptive move before it expands investment in China ahead of the subsidy phase-out as the company has been reportedly mulling 1 trillion won in investment to construct an addition plant there.

"Samsung SDI acquired the additional stake in order to strengthen management control of the joint venture," a company official said.

Samsung SDI has been pouring investment into China. In 2018, the company invested 231.3 billion won in another battery manufacturing subsidiary in Tianjin, raising its stake from 50 percent to 80 percent. These kinds of moves could be possible as the Chinese government last year relaxed the ownership limit of foreign car companies, which had been restricted to 50 percent.

Korean battery suppliers have been included in the top 10 list of the global battery makers in terms of EV battery supply to end consumers, showing their presences in Europe, North America and other places.

To capture the lucrative Chinese EV battery market, LG Chem also formed a joint venture in June with Geely, a top Chinese automotive group, to construct a battery manufacturing plant in Ningbo.

For the 50-50 joint venture, the two companies will invest $94 million each for the plant which will be capable of producing 10 gigawatt hours a year.

Expecting that China will abolish the state subsidy to EV makers at the end of 2020 or early 2021, Shin Hak-cheol, vice chairman of LG Chem told reporters in July that establishing the joint venture is a move "to secure a favorable position in China, which accounts for 51 percent of the global EV market."

SK Innovation is also accelerating to expand its EV battery business in China as it announced in May that it would construct the second battery production plant in Changzhou, investing 579.9 billion won, even though its first battery plant is still under construction.

Under a joint venture with Beijing Electronics Holding and BAIC Motor, SK Innovation began constructing the Changzhou plant in August 2018. The first plant is expected to begin operations in the first half of 2020.


Baek Byung-yeul baekby@koreatimes.co.kr


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