It’s no secret that Chinese manufacturers dominate the traction battery market for electric vehicles, but are politically barred from direct access to the enticing US market. Accordingly BloombergJudging by the activity of Chinese companies in South Korea, they will use this Asian state as a “guidepost” for the US market, organizing local production of batteries and raw materials for them in a neighboring Asian country.
According to the source, Chinese companies and their South Korean partners have jointly invested $4 billion in the past four months to set up five new companies in South Korea to produce batteries and raw materials for them. Negotiations on this issue are ongoing and the activity of Chinese manufacturers is unlikely to slow down. In this situation, Chinese companies are counting on the possibility of including batteries manufactured in Korea in the subsidy program for the sale of electric vehicles in the USA, provided for in the so-called Inflation Reduction Act. The plan is to subsidize the sale of electric vehicles equipped with traction batteries from countries that have a free trade agreement with the US. South Korea is one of them.
Chinese company Ningbo Ronbay New Energy Technology last week approved the construction of a plant in South Korea to produce raw materials for the manufacture of lithium battery cathodes. It will be able to produce 80,000 tons of products annually. China occupies a dominant position in the world market for lithium processing products, cobalt sulphate and for the production of both finished batteries and cathodes, anodes, electrolytes and separators for battery cells. By establishing companies in South Korea, Chinese companies hope to facilitate their entry into the markets of Europe and the United States. Korean manufacturers of finished batteries also rely heavily on Chinese-made raw materials. However, if a growing proportion of it is produced in South Korea, it increases the reliability of the supply chains. Cooperation between Korean and Chinese companies in this field is increasing.
However, Korean partners are aware that open cooperation with Chinese companies carries certain risks with regard to the threat of US sanctions. LG Energy Solution said in April it was ready to buy its stake in a joint venture with Chinese partner Huayou Cobalt if US sanctions threatened. Analysts from SNE Research are convinced that the US authorities cannot yet eliminate dependence on raw materials of Chinese origin, since without them it is impossible to produce electric vehicles in the required quantities. South Korean companies can learn a lot from Chinese partners. Even if sanctions are tightened, they are better prepared for the right timing.