Korean Companies Preparing for New Landscape in China Battery Market

The Chinese government has again excluded vehicles powered by Korean batteries from the list of the cars eligible for subsidy.

Last month, Yang Jiechi, a member of the Politburo of the Communist Party of China, disclosed during his visit to Korea that the Chinese government would withdraw sanctions against Korean products, including electric cars loaded with Korean batteries.

Yang’s remark raised hopes among Korean battery manufacturers that China’s discrimination against them would soon come to an end.

Yet electric vehicles powered by Korean-made batteries were excluded from the list of the subsidy-eligible vehicles announced early this month.

The Chinese government has excluded electric vehicles running on Korean-made batteries from subsidies for over a year and a half since the THAAD deployment in South Korea.

In China, government subsidies are so large that electric vehicles that are not subsidized cannot be sold.

This led LG Chem and Samsung SDI to increase the share of substitute products such as batteries for energy storage systems (ESSs) in their product portfolio as a means of preventing the utilization rate of their factories in China from falling

In the Korean battery industry, a pessimistic view is growing that there will be no change until 2020, when the Chinese government abolishes its subsidy program for electric cars. For this reason, Korean companies are expected to start preparations for resuming their battery business in China after 2020.

All three Korean battery producers -- LG Chem, Samsung SDI and SK Innovation -- will participate in the Beijing Motor Show that will kick off on June 25. Analysts say that they will participate in the event for the purpose of raising Chinese consumers’ recognition of their batteries and expanding customer contacts in preparation for the abolition of the subsidy policy.

"The reason why Korean battery makers are paying more attention to the Chinese market even after the Chinese government left its discrimination against Korean batteries in place is that China is the largest electric car battery market," an industry insider said. "Under a long-term strategy, they are preparing for a full-scale race that will unfold after the abolition of the subsidy program."