Korean Batteries Still Discriminated Against in China
While Korean electric vehicle (EV) batteries have lost their competitiveness in the Chinese market due to the Chinese government's subsidy barrier, Chinese batteries continue to increase their market share in Korea. The Korean government needs to change its battery subsidy policy to protect domestic producers.
The amount of Chinese batteries imported to Korea in 2019 is tallied at US$1,410.74 million. The figure more than doubled from US$721.80 million in 2017. In 2019, Korea’s battery imports from China swelled about 3 percent compared to US$1,371.67 million in the previous year.
In contrast, Korean-made batteries exported to China shrank 10 percent from US$1,231.86 million in 2018 to US$1,115.19 million last year. As a result, the deficit in Korea’s battery trade with China jumped from US$139.10 million in 2018 to US$295.55 million in 2019.
Battery exports to China by Korean battery makers such as LG Chem, SK Innovation, and Samsung SDI declined due to the Chinese government’s regulations, but Chinese companies expanded their presence in the Korea market.
Tesla’s Model 3 and the Mercedes-Benz E-Class plug-in hybrid electric vehicle (PHEV) will use batteries from LG Chem and SK Innovation, respectively, this year, showing an encouraging sign for the Korean battery industry. But due to the subsidy barrier, local Chinese automakers cannot adopt Korean batteries.
When the Chinese government first announced it would abolish subsidies for electric vehicles in 2021, Korean companies began preparations to penetrate the Chinese market after the subsidy program is abolished. But a continued economic downturn in the aftermath of the coronavirus outbreak has raised the possibility of the Chinese government delaying the abolition of the subsidy program. As China is the world's biggest EV market, it is a vitally important market not only for Korean automakers but for Korean battery makers.
The problem is that while Korean battery makers are struggling in China, their Chinese counterparts are expanding their presence in the Korean market.
The number of Chinese EVs (passenger cars + commercial vehicles) sold in Korea was only 26 in 2017 but shot up to 425 in 2019. Last year, 146 Chinese electric buses received subsidies from the Korean government, a 240 percent jump from 61 units in 2018.
Chinese electric buses’ market share decreased from 44 percent in 2018 to 25 percent in 2019 due to the expanded supply of Korean-made electric buses. However, considering that the Korean government’s subsidy per electric bus ranged from 200 million won to 300 million won, the aggregate subsidy for Chinese electric buses last year is estimated at between 24 billion won to 36 billion won.
In addition, among 25 types of electric buses qualified for subsidies in Korea this year, 16 were made in China. As the Korean government expands electric bus subsidies to 160 billion won, the supply of electric buses is expected to rise to 650 units in 2020.