SK Innovation is planning to build an electric vehicle (EV) battery manufacturing plant in Yancheng, China by investing US$1.05 billion. It is likely to become SK Innovation’s second EV battery manufacturing plant in China behind its plant in Changzhou.
SK Innovation’s plan has to do with Kia Motors’ business strategy. The automaker’s plant in Yancheng is expected to produce more EVs with the internal combustion engine vehicle demand on the decline in China and the Chinese government planning to provide more incentives for green cars.
SK Innovation’s new plant will be close to the automaker’s plant in Yancheng and, as such, most of the EV batteries produced there will be supplied to Kia Motors. The plant in Changzhou has an annual production capacity of 7.5 GWh and SK Innovation’s EV battery production capacity is expected to significantly increase once the plant in Yancheng is completed.
The annual production volume of Kia Motors’ plant in Yancheng fell from more than 650,000 units to 370,000 units from 2016 to last year. On the other hand, the pure EV sales volume in China jumped from 449,000 units to 756,000 units from 2017 to 2018. Under the circumstances, Dongfeng Yueda Kia, which is a joint venture between Dongfeng Motor Corporation, Yueda Group and Kia Motors, decided to stop producing Kia cars in its first plant in Yancheng to build an EV plant of Yueda Group. After the decision, it was said that the third plant in Yancheng could also be turned into an EV plant.
The Chinese government’s policy has resulted in a closer cooperation between SK Innovation and Kia Motors. The government’s EV subsidies for Chinese battery manufacturers are scheduled to be repealed next year and the government has provided incentives since early this year for EVs and hydrogen vehicles with a longer driving range. This means cooperation with South Korean battery manufacturers, which supplies better products than their Chinese counterparts, is a better option for automakers.
Other South Korean battery manufacturers are increasing their capacity in China, too. For instance, LG Chem invested two trillion won and built its second plant in Nanjing last year, increasing its capacity by 32 GWh. Samsung SDI’s second plant in Xi’an is under construction now.
In addition, the South Korean battery manufacturers are setting up more and more joint ventures in China. For example, SK Innovation and Beijing Automobile Works built the Changzhou plant together and SK Innovation is going to build another plant with Chinese battery manufacturer Eve Energy. A joint venture between Volkswagen and SK Innovation, which is aiming to reach an annual production capacity of 60 GWh in 2022, is a point of much interest as well. The two companies recently agreed to use the latter’s batteries in the former’s ID.4 SUV.