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Sun, December 3, 2023 | 21:06
China's extension of EV subsidies to impact LG Chem, Samsung SDI, SK Innovation
Posted : 2020-04-08 10:03
Updated : 2020-04-08 18:23
Baek Byung-yeul
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LG Chem researchers check the firm's battery for electric vehicles at its plant in Ochang, North Chungcheong Province. / Courtesy of LG Chem
LG Chem researchers check the firm's battery for electric vehicles at its plant in Ochang, North Chungcheong Province. / Courtesy of LG Chem

By Baek Byung-yeul

Battery makers LG Chem, Samsung SDI and SK Innovation are likely to see a bumpy road ahead in improving their electric vehicle (EV) battery sales as countries affected by the COVID-19 pandemic are poised to side with domestic manufacturers to help them maintain their competitiveness against foreign players, industry officials said Tuesday.

The Chinese government said on April 1 that it would extend state subsidies given to EV manufacturers by two years until the end of 2022, abandoning its initial plan to remove the program after 2020.

The announcement came at a time when the auto industry in China has hit a major snag due to the coronavirus outbreak, which led manufacturers there to halt operations for months. Under its original plan to phase out the subsidy, the Chinese government has gradually reduced the amount but decided to extend the program to protect the local auto industry.

Data showed EV sales in China nosedived more than 70 percent in February compared with the same period in 2019 due to the coronavirus outbreak. According to market researcher SNE Research, the number of new EVs sold in February fell by 78.6 percent to 14,000.

Industry officials said the Chinese government's extension on the EV subsidy was obviously not good news for them as Chinese battery makers such as CATL could see significant growth thanks to the program.

"At present, the extension of the subsidy program will have little effect on Korean battery makers as their products have rarely been used in EVs sold in China. But in the long run, this is not good news because the extension will become an obstacle to battery firms in expanding their sales volume in the country," an official working in the industry here said.

LG Chem researchers check the firm's battery for electric vehicles at its plant in Ochang, North Chungcheong Province. / Courtesy of LG Chem
SK Innovation's battery manufacturing plant in Hungary / Courtesy of SK Innovation

Another industry official saw the extension as a turning point for Korean battery makers which have not been allowed to sell their batteries in China for years.

Korean battery makers have struggled with their business in China, which has the world's largest EV market, as EVs equipped with their batteries have not been eligible for the subsidies since 2016.

This was Beijing's apparent retaliation against Korean companies after their relationship turned sour amid diplomatic tension over Seoul allowing the deployment of a U.S. Terminal High Altitude Area Defense (THAAD) system here.

But in December 2019, Tesla and Mercedes-Benz EVs using batteries from LG Chem and SK Innovation, respectively, made the subsidy list and EVs using Samsung SDI batteries were also included in March.

"At a time when EVs equipped with batteries made by Korean makers are eligible to receive the state subsidy, the extension of the program could have a positive impact on us," the official said.

But he added that EV makers here are urged to closely watch the situation in China as there is a still concern that EVs using Korean-made batteries would be excluded from the new subsidy list.

"When the Chinese government announced its subsidy list on December 29, 2016, four EVs using batteries made by Korean companies were included. But the government abruptly decided to exclude the vehicles from the list in the afternoon of the same day. Given we have already experienced this, it is too early to say the decision to extend the subsidy program will be a favorable factor for Korean companies," the official added.

LG Chem researchers check the firm's battery for electric vehicles at its plant in Ochang, North Chungcheong Province. / Courtesy of LG Chem
LG Chem's factory in Poland / Courtesy of LG Chem

Another negative issue Korean EV battery makers faced is European carmakers' lobbying for a relaxation of CO2 laws.

Due to the coronavirus pandemic, the European Automobile Manufacturers' Association (ACEA) recently asked the European Commission to delay the schedule for vehicle CO2 targets.

As a measure to protect the environment, automakers have to reduce their CO2 emissions from 130 grams per kilometer to 95 grams starting this year. This strict policy has forced automakers selling their cars in Europe to produce more EVs so that they can meet the average CO2 emission target.

If the European Union decided to relax the policy, Korean battery makers, which have increased their manufacturing volume for European carmakers, could face a problem.

"At a time when Korean firms have planned to sell more EV batteries in Europe, the potential change in the policy will damage their business plans," an industry official here said. "However, as far as we know, the chances for the European Union to change its policy are slim as German carmakers don't want a delay in their future manufacturing roadmap."


Emailbaekby@koreatimes.co.kr Article ListMore articles by this reporter
 
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