Reluctant Use of Chinese-Made Batteries: Hyundai Motor Receives First Subsidy for EV from Chinese Gov’t | BusinessKorea

Sunday, February 25, 2018

As Hyundai Motor in China chose a Chinese battery company for its electric car Eand made the subsidy list, the Korean battery industry’s worries are further growing.
As Hyundai Motor in China chose a Chinese battery company for its electric car Eand made the subsidy list, the Korean battery industry’s worries are further growing.
Seoul, Korea
6 February 2018 - 11:00am
Jung Min-hee

An electric vehicle (EV) which has been introduced to China by Hyundai Motor in partnership with Chinese battery makers will receive a subsidy from the Chinese government. On the other hand, Korean battery makers is facing growing trouble as they lost the Chinese EV battery market to Chinese battery companies after the markets of batteries for hybrid electric vehicles (HEVs) and plug-in hybrid vehicles (PHEVs).

According to industry sources on February 5, the New Uiedong Electric of Hyundai Motor's Beijing subsidiary, Beijing Hyundai made the list of vehicles for subsidies announced by the Chinese government on February 2. The car was launched in July of last year but listed in February after seven months.

Hyundai Motor used batteries supplied by LG Chem, a Korean company, in purely electric cars. The Ioniq EV is a case in point. The upcoming Kona EV is also known to be loaded with LG Chem batteries. However, the Chinese government did not pay subsidies for green cars loaded with Korean-made batteries. As a result, Hyundai Motor received a subsidy this time.

Unlike HEVs and PHEVs, subsidies account for up to half the price of an electric vehicle. A failure to receive subsidies will make local sales virtually difficult. A subsidiary (89,000 yuan) accounts for 44.7% of the price (198,800 yuan) of the New Uiedung EV.

The Chinese government is planning to launch an obligatory electric car sales system in 2019, which is why Hyundai Motor replaced its EV batteries with Chinese-made ones. From 2019, the proportion of electric cars should increase 2%p from 8% each year and reach 10% by 2020.

Earlier Hyundai and Kia attempted to launch the Sonata PHEV and the K5 PHEV loaded with Korean-made batteries. In Korea, the two models are loaded with LG Chem batteries. However, due to the suspension of subsidy payment, the company delayed their launches for about a year. The Korean automakers will launch the models again this year by loading them with batteries from CATL.

This time, Hyundai chose a Chinese battery company and made the subsidy list, which makes the Korean battery industry’s worries further growing. This is because it is not easy for the Korean battery industry to find new buyers as Korean automakers that the Korean battery industry believed to use their batteries joined hands with Chinese battery companies in China, the largest electric car market in the world.

Vehicles powered by Korean-made batteries such as those of Samsung SDI and LG Chem, have disappeared from the Chinese government’s subsidy list since December 29, 2016. The list of electric vehicle subsidies announced by the Chinese government for the first time in the new year excluded vehicles loaded with batteries made by Korean companies. 118 models of 59 automakers were included in the list. But it was reported that vehicles loaded with batteries produced by Korean companies such as LG Chem and Samsung SDI were excluded from the list. With the thaw of the freeze of Korea-China relationships triggered by Korea’s deployment of the THAAD System, discussions on discriminations against Korean-made batteries in terms of subsidies between the Korean government and the Chinese government have been had but Chinese sanctions on Korean-made batteries are virtually continuing.

Korean companies have failed to pass a certification system that the Chinese government has been implementing since 2016. There were no vehicles with Korean batteries on the list of vehicles for the 12th eco-friendly subsidies announced by the Chinese government on January 29.

The Chinese government is expected to completely abolish subsidies for electric cars in 2020 and to cut subsidies 20% this year. As the Chinese government focuses on fostering Chinese companies amid subsidy reduction policies, it is forecast that discriminations against Korean companies will virtually continue.

Korean companies are responding by exporting production volume from Chinese factories to other countries or producing them for energy storage systems (ESSs). They are also focusing on expanding their business, centering on Europe and the US where they are expanding their production bases.


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