Hopes and Concerns Mixed
As Global automakers, which use South Korean batteries, are making a move to set up their electric car production plants in China, a new door has been opened for domestic battery manufacturers that have been struggling due to the Chinese government’s retaliation over the deployment of the U.S. Terminal High Altitude Area Defense (THAAD) missile system.
However, there are concerns that domestic companies can even lose a whole Chinese battery market when global automakers are satisfied with the product quality of Chinese battery makers which are growing under an umbrella of the Chinese government and start using their products.
According to BMW Blog and industry sources on October 17, there is growing expectations in Samsung SDI that the company can find a market in China as news comes that BMW is in talks with China’s Great Wall Motor Co. the possible production of Mini cars in the country.
In this regard, BMW said in its blog that the company discussed the joint development of electric and hybrid cars with Great Wall Motor in April 2016 and expanded the discussion to outsourcing production of the Mini models this year.
GM also announced that it would introduce a minimum of 10 new electric or hybrid cars in the Chinese market by 2020. Accordingly, some electric cars to be launched in China are likely to use LG Chem’s batteries.
Samsung SDI supplies its batteries to the all-electric BWM i3 and the plug-in hybrid BMW i8, while LG Chem supplies them to the GM Chevrolet Bolt electric car. An official from the industry said, “Since the Chinese government will abolish subsidies on electric car batteries by 2020 when the companies start producing electric cars, South Korean battery producers will be able to properly compete with Chinese counterparts in terms of price and quality. We expect that GM and BMW will become a bridgehead for domestic companies to expand the battery market in China.”
In fact, LG Chem had many Chinese automakers as its customer companies such as Shanghai Automotive Industry Corporation, First Automobile Works Group and Changan Auto as well as Great Wall Motor, earlier. However, the South Korean battery producer stopped supplying its products as the Chinese government excluded electric vehicles using LG Chem’s batteries from the subsidies. The situation is very much the same with Samsung SDI which had numerous Chinese customer companies including Zhengzhou Yutong Bus, Foton, JAC.
However, there are also concerns that things will change when Chinese battery manufacturers are recognized for the quality from global car makers before 2020. Market watchers say that major automakers are using Chinese batteries by developing electric cars for the Chinese market to receive subsidies.
They also say that Chinese electric vehicle batteries lag behind the products of LG Chem and Samsung SDI in terms of quality but they are expected to grow rapidly due to the economy of scale. According to market research firm SNE Research, six Chinese companies ranked among the top 10 global electric car battery manufacturers in terms of shipments as of the end of July this year. If global car makers, which are trying to phase out their reliance on South Korean and Japanese batteries, and Chinese battery producers share the same interests, it can be an unfavorable factor for domestic firms. In fact, GM is planning to jointly establish a battery plant with China’s SAIC.