A Competitor to Tesla EVs in China

SK Innovation's share of the Chinese battery market is expected to jump as BAIC Group of China is expanding investment in its premium electric vehicle (EV) brand Arcfox.

As BAIC Group of China is expanding investment in its premium electric vehicle (EV) brand Arcfox, SK Innovation's share of the Chinese EV battery market is expected to jump. SK Innovation supplies batteries for all Arcfox models through a battery joint venture established with BAIC.

BAIC will issue 5.5 billion yuan worth of private shares to increase investment in Arcfox. Beijing New Energy Automobile, a subsidiary of BAIC, will invest 4.23 billion yuan to develop three Arcfox models and establish a sales network, 368 million yuan to upgrade a 5G smart connected system, and 1.17 billion yuan to develop a battery replacement system.

Industry watchers predict that SK Innovation will greatly expand its share of the EV battery market in China by using Arcfox as a stepping stone. BAIC will use batteries from its joint venture with SK Innovation for all models including the upcoming Arcfox model. "Besk," a joint venture established by SK Innovation and BAIC in 2013 with an investment of 1 billion yuan, has built a battery cell plant in Changzhou, China, through its 100 percent subsidiary "Best." SK Innovation chose a "China Insider" strategy as the Chinese government stopped providing subsidies to electric cars equipped with batteries from Korean companies following Korea’s deployment of the Terminal High Altitude Area Defense (THAAD) system.

In particular, the Arcfox electric sport utility vehicle (SUV) "Alpha-T," which has already started to receive preorders, is drawing attention as a competitor of Tesla models in China. The Alpha-T enjoys subsidies from the Chinese government as it uses batteries produced by a joint venture between a foreign company and a Chinese company. The subsidy reduces the price of the vehicle by about 10 percent. Arcfox's 653-kilometer mileage is the longest among EV models eligible for the Chinese subsidy.

It is a positive that China's electric vehicle market is recovering along with a drop in new coronavirus infection cases. EV sales in China dropped to 14,000 units in February 2020 due to the spread of the COVID-19 virus but climbed to 129,000 units in June, said market research firm SNE Research.

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