Chinese Government abolished its system for recommended list of electric vehicle battery manufacturers. Although it is uncertain whether decision will lead to subsidy being paid again, this decision is a positive sign for three South Korean battery manufacturers to enter Chinese market again.
Ministry of Industry and Information Technology (MIIT) of the Chinese Government stated through its homepage that it decided to abolish ‘normative terms for automotive battery industry’ as of the 21st. As a result, a list of businesses that are announced after going through four procedures is abolished as well.
MIIT utilized ‘normative terms for automotive battery industry’, which was established in 2015, as an excuse to discriminate foreign businesses and to include businesses to its list only if they meet certain conditions and pay subsidy for electric vehicles that are based on batteries manufactured by businesses that are on its list.
South Korean industries predict that Chinese Government’s plan to abolish electric vehicle subsidy system at the end of 2020 will be a major help for South Korean businesses to enter Chinese market again.
However, some predict that there will not be any practical change as there has been discrimination towards subsidy even though three South Korean battery manufacturers are part of a ‘whitelist’ that is an upgrade version of normative terms for automotive battery industry. LG Chem’s Nanjing Corporate, Samsung SDI’s Xi’an Corporate, and SK Innovation’s joint corporate called BESK Technology were included into a whitelist in May of 2018. Unlike normative terms for automotive battery industry, whitelist includes a list of outstanding certified businesses that are announced by China Association of Automobile Manufacturers.
“Whitelist is type of a quality certification system and it does not have any direct relationship with payment of subsidy.” said a representative for South Korea’s battery industry. “Because it is heard that China’s subsidy system will be abolished at the end of 2020, abolishment of normative terms for automotive battery industry will not have a major impact on South Korean industries.”
South Korea’s electric vehicle battery industry is increasing its investments in China to prepare for the aftermath of abolishment of subsidy system. LG Chem decided to establish a joint corporate with Geely Automobile, which is China’s top automotive manufacturer, and secure 10GWh production capacity by end of 2021. It is currently constructing its second electric vehicle battery plant that can produce 35GWh batteries annually in Nanjing. SK Innovation is planning to finish construction of its plant that can produce 7.5GWh batteries annually in Changzhou sometime during the second half of this year and it recently started construction of its second plant that can produce 22GWh batteries annually. Samsung SDI is also looking into constructing additional plant in Xi’an.
“Abolishment of normative terms can be an opportunity for South Korean battery manufacturers that could not enter Chinese market.” said Director Kim Byung-joo of SNE Research. “Because CATL and six Chinese electric vehicle manufacturers are establishing their own supply system, we have to wait and see how much South Korean businesses can infiltrate Chinese market by infiltrating their supply system.”
Staff Reporter Jung, Hyunjung | email@example.com