The performance of Chinese small and medium-sized electronic vehicle (EV) battery makers has begun to deteriorate as the Chinese government has started to scale back its subsidies for EVs loaded with batteries produced by Chinese manufacturers. Market watchers say this situation can offer an opportunity for Korean battery giants including LG Chem, Samsung SDI and SK Innovation to expand their presence in China.
According to industry watchers and foreign news outlets, Contemporary Amperex Technology Co. Limited (CATL), a Chinese battery manufacturer, posted 29.611 billion yuan (about 4.91 trillion won) in sales last year, up 48 percent from the previous year. Its net profit dropped 7.7 percent to 3.58 billion yuan (about 593.47 billion won), but the company still ranked first with the largest sales volume in the EV battery market.
Meanwhile, Chinese smaller battery suppliers suffered a drop in sales, or a plunge in net profits.
China’s EV battery usage is on the decrease from August this year. According to SNE Research, a global market research firm, the battery energy volume of the electric vehicles which were newly registered in September in China totaled 4.4 GWh, down 30.7 percent from the same month a year ago. The two-digit decrease had already started from August.
The Chinese government is reducing its EV subsidies under a plan to fully phase out the subsidy program by 2021. These situations, coupled with the sluggish global demand for electric vehicles, put the viability of the Chinese smaller battery manufacturers at risk, said industry watchers.
Yet they are expected to offer opportunities for Korean companies. A battery industry official said, “Such market trends will provide an opportunity for Korean batter makers, which boast advanced technologies.”
LG Chem plans to focus on the Chinese market by establishing a joint venture with a finished vehicle manufacturer, which ranks first in the country. Samsung SDI now mainly produces EV batteries for customers in Europe at its Xian plant in China, due to the subsidies Beijing provides to discriminate against Korean battery makers. However, it expects that the upcoming abolishment of subsidies will provide it with an opportunity to enter the local market.
SK Innovation is also expecting the battery market in China will be fully open in the wake of the subsidy termination. The Korean battery company already established a wholly owned subsidiary, “BEST,” in China in 2017, and now its first battery cell plant is under construction in Changzhou, China.