The Chinese government issued an industrial regulatory plan that will expand the minimum size of battery manufacturers’ facilities in China 40-fold. Korean battery companies such as LG Chem, Samsung SDI, and SK Innovation seem to be virtually unable to get approval for several years.
The Korean battery industry sees the Chinese government's action as its intention to block Korean companies’ entry into the Chinese battery market. Some say that it is retaliation against the Korean government's decision to deploy the Terminal High Altitude Area DefenseTerminal High Altitude Area DefenseTerminal High Altitude Area Defense (THAAD) System in connection with a recent move by the Chinese government to ban the Korean Cultural Wave. Some analysts say that the Chinese government rules out foreign companies more because of a lack of subsidies for eco-friendly batteries.
According to relevant industries on November 23, the Ministry of Industry and Information Technology of China in charge of Chinese industrial policies announced a revision draft of the “Automobile Battery Industry Standard Conditions” on November 22. The gist of the amendment is that the Chinese government will certify electric car battery companies as standard companies only if they significantly increase production facilities in mainland China (excluding Hong Kong and Macao).
Lithium-ion battery makers have to increase their minimum production capacities 40-fold from current 0.2 GWh to 8 GWh. nickel-hydrogen battery manufacturers also should expand their production facilities 10-fold from 0.01 GWh to 0.1 GWh. The Ministry of Industry and Information Technology is expected to approve the amendment as early as January next year after collecting opinions from companies.
8GWh is capable of supplying batteries to 130,000 high-performance pure electric vehicle (EV) with a capacity of 60㎾h per year. LG Chem currently operates a battery plant with a production capacity of 50,000 units in Nanjing, China, while Samsung SDI’s Xian plant supplies batteries to 40,000 EVs. It is said that there are only two companies with 8GWh facilities such as BYD in China.
The Chinese government is planning to select companies which will receive environment-friendly subsidies by assessing battery companies which are too many through the amendment. But it seems that the Chinese government wants to exclude Korean companies. All of the companies that have already passed the battery certification condition are Chinese companies. By way of this amendment, the Chinese government can delay Korean companies’ acquisition of such certificates for several years. LG Chem and Samsung SDI have not been listed on the list of 1st to 4th battery-certified companies so far and are waiting for the 5th certification. However, if the amendment comes into force before that, their 5th certification will be over or they should wait until meeting regulations.
SK Innovation recently stopped discussing investment in an EV battery plant in China. The company planned to set up a joint venture, BESK in Beijing in 2014 with Beijing Electronics and Beijing Motor Co., and to begin building a large-scale EV battery plant by the end of this year. However, SK Innovation began to wait and see, observing the Chinese government building up industrial barriers higher against Korean companies.
China's electric car companies have already stopped trading with Korean companies that have not passed certification by the Ministry of Industry and Information Technology. In July, China’s JAC stopped production of sports utility vehicle (SUV)-type electric vehicles loaded with Samsung SDI batteries. China's No. 1 bus and truck maker “Yutong” and top 10 truck maker “Foton” reportedly have stopped receiving Samsung SDI batteries that were installed in their electric buses, citing safety concerns.
China’s Ministry of Industry and Information Technology said that 289,000 electric vehicles had sold in China and electric car battery shipments had reached 12GWh by September of this year. This figure eclipses total electric cars sold in the US and Europe in the same period. The Korean battery industry is losing its leadership, while failing to clear local regulatory barriers in China, the world’s largest electric car market.