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Korean EV Battery Makers Set to Benefit from Restructuring of Chinese Battery Industry
China's No. 3 Battery Maker Goes Bankrupt
Korean EV Battery Makers Set to Benefit from Restructuring of Chinese Battery Industry
  • By Jung Min-hee
  • December 27, 2019, 14:06
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OptimumNano Energy, the third largest electric vehicle (EV) battery supplier in China, has filed for bankruptcy and liquidation.

OptimumNano Energy, the third largest electric vehicle (EV) battery supplier in China, has filed for bankruptcy and liquidation with a court in Shenzen, a Chinese media reported on Dec. 25.

OptimumNano Energy’s bankruptcy may prompt a restructuring of the Chinese battery market. The Chinese government has been slashing financial subsidies to Chinese EV battery makers since June to weed out incompetent players, and is planning to phase out the generous subsidy policy by 2021. The Beijing government’s move may drive out some of the Chinese firms that have made irrational investments based on the government’s subsidy policy.

OptimumNano Energy was the first Chinese company to commercialize EV batteries. Its market share reached 26.6 percent in 2015. It had maintained third place in China until 2017, with its market share in China reaching. Since 2018, however, it has faced financial difficulties, with its debt totaling 19.7 billion yuan (about US$2.8 billion).

Its bankruptcy is interpreted as a signal of the restructuring of the EV battery industry in China. GGII, Chinese market research agency, analyzed that the number of EV battery makers in China, which amounted to 200 or so in 2006, dropped to 60 or so in the first half of this year, and will shrink further to 20 or so next year. Many Chinese EV battery manufacturers including OptimumNano Energy managed to survive on government aid that amounted to double the production cost, but dwindling subsidies drove them out of the market.

Sales of new energy vehicles such as electric cars in China stood at 95,000 units in November, 44 percent down from the same period of last year. Some EV battery makers failed to win any contracts for several months. Some large companies are also suffering from plunging orders. Market tracker SNE Research said the usage of EV batteries produced by Chinese supplier Contemporary Amperex Technology (CATL) amounted to 2,082 MWh as of October, down 16.8 percent from a year earlier, and the usage of batteries from another Chinese company BYD plummeted 65.7 percent.

This situation will benefit Korea’s top three EV battery makers -- LG Chem, Samsung SDI and SK Innovation. Unlike Chinese battery makers that posted negative growth this year, LG Chem, Samsung SDI and SK Innovation posted a sales growth of 28 percent, 28.6 percent, and 153.8 percent, respectively, as of the end of November. In particular, the energy density of EV batteries produced by Chinese small and medium-sized companies is reportedly 140 to 160 Wh per kilogram, while that of Korea’s major EV battery producers is above 250 Wh per kilogram. This shows a substantial technology gap between Korean and Chinese companies.

Yet the three Korean companies need to achieve an economy of scale by expanding plants and securing customers. The global EV battery market is likely to be converted into an oligopoly in the next several years just like memory semiconductor markets. Universal Bank in Switzerland (UBS) forecasts in a report that the top five firms will occupy 80 percent of the global battery market by 2025.

In particular, Volkswagen, GM and other carmakers are currently building battery plants in collaboration with domestic battery maker, but they may opt to build their own plants in the near future. A chemical industry source said unlike memory semiconductor markets where frontrunners run far ahead of latecomers in terms of technology and productivity, the battery market has relatively low entry barriers, which make it difficult for frontrunners to stay ahead of the pack. “The three Korean companies need to focus more on developing new technologies such as all solid-state batteries, which are called the dream battery,” said an industry insider.