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| Kim Jong-hyun, right, president of LG Chem's energy solutions business, shakes hands with Geely Vice President Feng Ching Feng, after the two companies agreed to set up a joint venture for EV batteries, at the latter's research center in Ningbo, China, Wednesday. / Courtesy of LG Chem |
By Baek Byung-yeul
LG Chem is forming a joint venture with top Chinese automotive group Geely to produce batteries for electric vehicles (EVs), making an aggressive foray into the world's biggest EV market, the chemical and energy arm of LG Group said Thursday.
The two companies agreed to the deal at the Chinese automaker's research center in Ningbo, China, Wednesday. For the 50-50 joint venture, the two companies will invest $94 million each to construct a battery manufacturing plant, which will be capable of producing 10 gigawatt hours a year.
"The two companies could reach an agreement for the joint venture because LG is trying to expand its dominance in the Chinese market while Geely wanted to secure a stable supply chain of battery packs," an LG Chem official said.
They will break ground for the battery manufacturing plant at the end of 2019 and will supply batteries produced at the joint venture to Geely and its subsidiaries starting in 2022. The company name and the location of the battery plant in China will be announced later.
Korean battery makers have been struggling with their business in the mainland as EVs equipped with their batteries have been unable to receive government subsidies since 2016.
However, after China announced it will phase out state subsidy programs given to EV manufacturers by 2020, LG has been investing aggressively in China to prepare for the future.
Since October 2018, LG Chem has been constructing its second battery manufacturing plant in Nanjing. In early 2019, the firm also announced it will spend 1.2 trillion won ($1 billion) more to expand its Nanjing battery plant.
LG Chem said such aggressive moves are in response to the fast-growing demand for EV batteries in China. According to data by Mirae Asset Daewoo, 1.5 million EVs are expected to be sold in China in 2010 and the figure is estimated to grow to 3.5 million in 2023 and 5.8 million in 2025.
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