Batteries: China opens its battery market to foreign companies

Battery

On June 21st, China’s Ministry of Industry and Information Technology (MIIT) scrapped the “white list” of recommended battery suppliers, a decision foreign companies said could open up the world’s biggest market for electric vehicle batteries.

According to Reuters, foreign battery makers complained the list discouraged competition and became linked to generous subsidies for recommended domestic companies such as CATL and BYD.

Roskill view: Since 2015, automakers operating in China were eligible for NEV (New Energy Vehicles: BEV, PHEV, FCEV) subsidies only when installing EV batteries recommended in a specific government-made catalogue.

The MIIT issued in March 2015 the “Standard Conditions for the Automobile Power Storage Battery Industry”. EV battery makers could voluntarily file an application and those who satisfied the standards would be included in the catalogue of recommended EV battery suppliers, also known as the “white list”. Coincidentally, only Chinese battery makers were included in the catalogue, a measure designed to promote local players in a nascent but strategic new industry. Since then, the MIIT has released four lists including a total of 57 battery companies, in which top-tier battery makers like Panasonic, LG Chem or Samsung SDI are not featured. This list led some Chinese automakers and foreign battery companies to try to evade the regulation through legal loopholes. This was the case with Geely´s subsidiary Zhejiang Hengyuan using LG Chem licensed battery technology.

In 2018, the “white list” created a battery market in which only 12% of Chinese installed manufacturing capacity corresponded to foreign companies. However, this is expected to change with Korean and Japanese established companies expanding rapidly. By 2025, Roskill estimates that around 25% of the installed Chinese capacity will correspond to foreign companies. Samsung SDI in China will grow from almost non-existent capacity to 25GWh at its Xi´an plant and 12GWh at its Tianjin plant. Similarly, SK Innovation is expected to reach 8GWh in its joint venture with BAIC and Beijing Electronics Holding in Changzhou. By then, Panasonic is also expected to bring around 10GWh into production at its Dalian plant.

However, the bulk of the newly installed capacity will come from LG Chem. The Korean company is expected to bring an estimated 75GWh into production by 2025 from its plants Nanjing I and Nanjing II and its joint venture with the Chinese automaker Geely in Ningbo.