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Chinese Battery Makers Wage Price War in Global Markets Amid Ongoing THAAD Sanctions
A Double Whammy for Korean Battery
Chinese Battery Makers Wage Price War in Global Markets Amid Ongoing THAAD Sanctions
  • By Michael Herh
  • April 4, 2018, 01:00
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Competition is heating up in the global electric vehicle battery market as Chinese companies wage a price war.
Competition is heating up in the global electric vehicle battery market as Chinese companies wage a price war.

 

With sanctions ongoing against South Korean batteries for electric vehicles in China, the largest electric car battery market in the world, competition in the global battery market is heating up.

This is because as South Korean companies are building production facilities in Europe, accelerating their invasion of the global battery market, Chinese companies, as latecomers, joined competition to win orders with strong price competitiveness.

Even though there is an expectation that China will lift its retaliation against South Korean companies for the deployment of the THAAD System in South Korea, a stronger view is that sanctions against South Korean batteries will hold for the time being.

Earlier, a lot of attention was paid to whether or not the Chinese government would include South Korean batteries in the list of batteries for subsidies when it began to soften its retaliation against South Korean products. But South Korean batteries have been excluded from the list. Although there is a possibility that the Chinese government will change its policy in June, a dominant view is that vehicles powered by South Korean batteries will not benefit from its subsidies.

In the battery industry, it is predicted that South Korean battery manufacturers will only be able to play on a more level playing field in China around 2020 when the subsidy system for electric cars will be abolished. The Chinese government is gradually reducing subsidies starting from this year with the aim of abolishing the subsidy system totally in 2020.

This situation has led South Korean battery makers to step up their efforts in markets other than China. They are turning their eyes to Europe and the United States, establishing production bases locally. However, Chinese companies are beginning to wage a price war in global markets, further intensifying the competition to land orders.

Volkswagen selected China's CATL as a supplier of next-generation batteries for electric vehicles along with South Korean companies such as LG Chem and Samsung SDI. CATL is reportedly considering building local factories in Europe such as Poland and Hungary.

Burdens on battery makers increased as Chinese companies joined the competition with price competitiveness. Prices of cobalt, lithium, and other core raw materials for batteries have been steadily rising. It is said that the proportion of cobalt in production cost has risen to more than 20 percent from around 5 percent due to a hike in the price of cobalt. Some experts say that as prices of raw materials rose, battery makers have to raise their supply prices but fierce competition does not allow them to do that.