The Korean battery top three formed a new joint venture company to prepare for 2020

The world's largest new energy vehicle market is about to open up competition, attracting not only the Korean giants, but in line with Tesla's Production Plan in China, Matsushita has also launched China's capacity expansion plan, new energy vehicle power battery field. The most stimulating competition between China, Japan and Korea has already begun.

For Chinese local battery makers, the good days may be coming to an end. At the end of 2017, it was also known as the Korean power battery that was completely defeated in China. It was already in the spring of 2018. With the withdrawal of China's new energy vehicle subsidies into the last two countdowns, since April, the three major battery companies including Samsung, LG, SKI (SKInnovatio) have broken the silence and launched a new round investment in China.

On April 11, the listed company Huayou Cobalt announced that it plans to jointly invest RMB 4 billion with LG Chem to establish two joint ventures to produce lithium battery materials. The two parties will each hold one of the joint ventures. At the same time, it is reported that Chinese automakers are negotiating with South Korean LG chemical battery manufacturers to prepare their products. In fact, although the Korean battery will not be subsidized, the Korean battery has appeared in the catalogue of the 307th new energy models released by the Ministry of Industry and Information in mid-April.

SKI also announced in the near future that it will invest 86.4 billion won to restart the new joint venture plan announced in 2016, and the new joint venture will also produce battery materials. The Economic Observer reported that it was only a year after the suspension of production "hibernation", SK and Beijing Automotive's joint venture company Beijing Electric Controls Aisi Technology Co., Ltd. (BESK) are also preparing to restart.

On May 2nd, South Korea’s Samsung Electronics Vice President Li Zaiyu visited BYD in Shenzhen. The outside world speculated that in order to seize the opportunity of China’s new energy vehicles, Samsung, a BYD shareholder, is expected to cooperate with BYD in the field of electric vehicles. Samsung also issued a clear signal that Samsung SDI, the group's battery business segment, said in its first-quarter earnings report: "We will prepare for the (China's) new energy vehicle subsidy policy to end in 2020."

In the past two years or so, the Korean power battery has staged a three-step episode of high-profile entry into the market, large-scale investment, and abrupt end. Since the double "minefield" of policy and market, it has been from the end of 2016. The power battery business of the Korean giants in China is almost in a "clearing" state. Of the nearly 560,000 new energy passenger cars in China in 2017, only 5,648 used Korean LG batteries.

The outflow of the Korean power battery directly contributed to the rapid growth of the share of Chinese local battery companies represented by the “Ningde myth”. However, according to the plan, China's new energy vehicle subsidy policy will be completely abolished in 2020 after four years of decline, and the double point system will also be implemented in 2019. "Korean battery companies are huge. At present, their strength and development capabilities are difficult for domestic companies to compete with." Director of the Power Battery Laboratory of the North China Vehicle Research Institute and the director of the National 863 Electric Vehicle Major Power Battery Test Center Winter name.

The world's largest new energy vehicle market is about to open up competition, attracting not only the Korean giants, but in line with Tesla's production Plan in China, Matsushita has also launched China's capacity expansion plan, new energy vehicle power battery field. The most stimulating competition between China, Japan and Korea has already begun.

As of press time, the relevant person in charge of LG China's business responded with a “no explanation” to its new investment. The Samsung SDI factory also told the Economic Observer that it is currently inconvenient to respond to its current situation in China and its investment plan.

The business stagnation in the past two years will end?

"From the current situation, we are considering preparing to restart the joint venture factory." At the Beijing Auto Show on April 25, BAIC officials told the Economic Observer. He said that the joint venture factory refers to the battery company BESK jointly established by Beijing Electronics Holdings Co., Ltd., BAIC Group and South Korea SKI at the end of 2013. Among them, SKI holds 40% of the shares, and the two Chinese shareholders share Holding 60% of the shares, after the production started in June 2014, the factory is responsible for assembling the batteries produced in Korea into lithium-ion battery packs, and then supplying batteries to BAIC's new energy vehicles. The annual revenue is estimated to be 50 billion won $45 million). However, due to the sharp drop in orders from the end of 2016, BESK announced the suspension of production in early 2017.

Like SKI, Samsung and LG also launched a large-scale investment and construction plan for power batteries in China as early as 2014. In October 2015, Samsung SDI Xi'an Battery Base - Samsung Ring New Automotive Power Battery Project was put into operation. The project, which plans to invest a total of $600 million by 2020, was called China's largest power battery base at that time, with an annual output of 40,000 electric vehicles, with the goal of achieving annual sales of $1 billion. At the time of completion, it has signed a supply agreement with more than ten local commercial vehicles and car companies in China, such as Yutong and Tian.

Following the pace of Samsung SDI, the LG Chem Nanjing Power Battery Project (also known as the Nanjing Lejin Chemical New Energy Battery Joint Venture Project) with a total investment of US$3.5 billion was completed at the end of the year and became the largest power battery base in LG.

In 2015, China became the world's largest consumer market for new energy vehicles for the first time, especially the large-scale mass production of new energy buses that were greatly subsidized, bringing unprecedented business opportunities to Korean ternary batteries. At that time, SDI, LG Chem, and SKI had provided new energy vehicle power batteries to almost all major automakers in the world, including BMW, Mercedes-Benz, Audi, Volkswagen, General Motors, Ford, Renault, Hyundai-Kia, etc., and they were proud of the Chinese market. Aspirations must be won.

However, the Chinese market has not developed according to the expected route of the three major battery giants. At the beginning of 2016, the outbreak of the new energy fraud incident, coupled with the ban on the ternary battery on the passenger car, directly pushed the supervision of the power battery to the cusp. In mid-2016, a “battery white list” announced the outflow of Korean batteries. The Chinese government successively introduced the revised guidelines for the “New Energy Vehicle Access Rules” and the catalogue of automotive power battery product inspection standards, and accordingly formed the fact that the "white list" of power battery enterprises was linked to government subsidies.

There is no foreign battery company in the “white list” of 57 companies. In the following months, Samsung's Jianghuai, GAC, Beiqi, which uses SK batteries, and the Great Wall, SAIC, and Brilliance vehicles equipped with LG batteries, all took emergency measures to switch battery suppliers.

From the end of 2016 to 2017, the three major Korean battery companies have stagnate in China's new energy battery business. Bad news continued to come - Samsung SDI Xi'an plant suspended the expansion of new production lines, Wuxi factory extension, BESK also stopped production, the under-operated LG Nanjing factory even once reported that it will be resold to SAIC.

In October 2017, due to losses and insolvency, the two major Chinese shareholders of Samsung (Tianjin) Battery Co., Ltd. listed 30% of the equity of the joint venture company. The reporter found that in March 2018, the listed equity had been taken over by Samsung Electric (Hong Kong) Co., Ltd., and Tianjin officially withdrew from the joint venture.

The industry generally believes that LG's price of batteries as low as 1 Yuan /WH, and Korea's overly eager market share ambition is a hand to push it outside the Chinese market. However, some analysts have denied this analysis.

Forming a new joint venture company to prepare for 2020

Billions of billions of investment were suddenly pressed by the pause button, which was fatal to Korean battery companies. But in the face of the world's largest new energy vehicle market, they have no retreat. The only thing they can do is waiting.

In 2017, the total sales volume of new energy vehicles in the world was 1.42 million units, of which China contributed 777,000 units, accounting for more than half of the total. The demand for batteries increased by 30% year-on-year, and this big cake is basically owned by China. Battery companies divide. However, in less than two years, China's new energy subsidies will eventually withdraw. In 2020, China will fully guarantee the goal of selling 2 million new energy vehicles. This gives Korean batteries the opportunity to re-enter the Chinese car battery supplier list, and this year naturally becomes the best time to expand production capacity.

In fact, even if it is temporarily "sleeping", the Korean battery top three has never stopped the layout of China's new energy vehicle market. In April 2016, SKI stated that it is negotiating with several companies and plans to cooperate in the construction of an electric vehicle battery factory in China. At the end of 2017, SKI established a legal person in China, “SK Battery China Holdings Co., Ltd. (hereinafter referred to as SK Holdings)”, which is responsible for investing in China's battery business. In early 2018, SK Holdings changed its name to “SK Blue Dragon Energy” and announced an investment of 86.4 billion. The Korean won is used to establish a joint venture for battery material production in China.

In this round of investment, the Korean top three began to look for local companies in the industry chain to cooperate, and began to invest in the upstream of the battery industry chain - battery material production, including SKI new joint venture projects, and two new joint ventures of LG This is true for battery companies. While circumventing market and policy risks, it will also lengthen the industrial chain based on previous investment. SKI's previous joint venture with BAIC produced battery packs. Samsung Xi'an Battery Factory produces batteries and automotive power batteries module. The two new joint ventures between LG and Huayou Co., Ltd. produce lithium-ion ternary precursors and ternary cathode materials, which are directly linked to the LG Nanjing battery factory. On the official website of Nanjing Lejin Chemical New Energy Battery Company, the recruitment of talents in various positions is also continuing.

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