Analysts say move will encourage more international competition and grow industry
China has scrapped its list of recommended battery suppliers as part of its efforts to further open up the world's largest electric car market. Analysts said the move will help boost the industry.
The list, which did not include foreign firms when it was first published in 2015 to spur the growth of China's battery sector, was abolished in late June as part of government management reforms, the Ministry of Industry and Information Technology of China said in a statement on its website last week.
Because new energy vehicles equipped with batteries from companies on the list qualified for government subsidies, the list created favorable conditions for local Chinese battery makers and helped spur their growth over the past years.
Among others, local companies CATL and BYD have stood up as giants in the power battery segment, with the two combined securing more than 60 percent of the market share in the country.
Cui Dongshu, secretary-general of the China Passenger Car Association, said China's move to abolish the list is helpful to stimulate competition in the industry.
"It will help international carmakers speed up launches of new energy models in China and also enable Chinese carmakers to secure batteries at lower costs," Cui said.
International battery makers said they welcome the move.
"We are relieved these lists are going away, but we cannot be certain if the Chinese government is committed to abolishing subsidies until they actually remove all subsidy policies," an executive at one foreign battery maker told Reuters.
South Korean battery makers LG Chem and Samsung SDI have been increasing their investment in China amid expectations for a gradual change in policy.
LG Chem, the world's fourth largest battery maker, announced in June its plans to build a $188 million joint venture with Chinese carmaker Geely to produce and sell batteries for new energy vehicles.
Construction of the joint venture will kick off later this year. When completed by the end of 2021, it is expected to have an annual production capacity of 10 GWh, and the batteries will be installed on Geely's vehicles from 2022.
Geely President and CEO An Conghui said this joint venture further strengthens the carmaker's position as a leader in new energy vehicles. The South Korean company said it would also pursue joint ventures with other carmakers.
"Through the joint venture, LG Chem has secured a stable structure to provide batteries for electric vehicles in the Chinese market," the company said in a statement.
Analysts said as soon as there are new and reasonable choices, it is inevitable that some of CATL's current customers will start to do business with other battery makers to prevent putting all its eggs in one basket.
As China cuts its subsidies and is expected to stop all of them by the end of 2020, Chinese battery makers including CATL are exploring overseas markets and diversifying business. In a statement last week, CATL said it will scale up its investment in a production and research base in Germany up to 1.8 billion euros ($2.05 billion) from 240 million euros.
The investment will be used to construct a lithium-ion battery production base and a center for product research, development and testing, the company said.
Construction is estimated to last at least 60 months, and the project will cover around 70 hectares.
The move will enable the convenience supply of batteries to carmakers in the country and in Europe as a whole. Volkswagen, BMW and Mercedes-Benz are some of its largest customers.
Also in June, CATL announced it is teaming up with fintech firm Ant Financial Services and Alibaba-backed bike-sharing startup Hellobike to establish an electric bicycle battery joint venture.
The joint venture, with an investment of 1 billion yuan, plans to set up a network of storage units allowing riders to pick up charged batteries on the go.
"We've defined the battery-swapping service as a long-term, basic energy source for society, just like gas stations," said Hellobike's Chief Executive Yang Lei.
China now has over 250 million e-bikes and the number is expected to continue growing in the coming years.
Editor:Cherie
