Samsung SDI and LG Chem Have A Battery Problem In China Where Subsidies Were Redirected To LFP-Type Cells

2 years ago by Mark Kane 43

Samsung SDI Opens An EV Battery Plant In China

Samsung SDI Opens An EV Battery Plant In China

Nanjing Golden Dragon Bus goes electric with LG Chem

Nanjing Golden Dragon Bus goes electric with LG Chem

The Chinese government surprised two South Korean lithium-ion battery manufacturers, both of which recently opened new factories in China .

Samsung SDI opened a battery plant around five months ago, while LG Chem just earlier this year.

The bulk of the batteries produced by Samsung SDI and LG Chem are pretty advanced, with high-energy density, while for the most part Chinese manufacturers often produce lithium-iron-phosphate (LFP) cells.

According to Bloomberg, someone at the government came up with the idea to cut subsidies for electric buses (up to 40%) that doesn’t use LFP chmistry. As electric buses of all-kinds are big part of Chinese market, Samsung SDI and LG Chem could be hit hard – think “double-digit sales drops“.

“Buses are about half the EV market in China, and the government has suspended its once-generous consumer subsidies for EV buses using batteries like the ones Samsung and LG make—a combination of nickel, cobalt, and manganese (NCM). Subsidies will continue for less-advanced lithium-iron-phosphate (LFP) batteries, according to the state news agency, Xinhua. Samsung’s battery unit, which last year opened an NCM battery factory in China and plans to invest $600 million there by 2020, said in a statement that the company is “considering various ways to respond.” LG’s battery unit declined to comment.”

BYD electric buses

BYD electric buses – all LFP proof

Which means that long-time LFP manufacturer, and, user BYD must be happy these days.

“Without government subsidies, which can account for as much as 40 percent of the price of an electric vehicle in China, models with NCM batteries will have more trouble finding buyers. A Chinese shift away from NCM could mean a 10 percent drop in LG’s global battery sales, says Lee Dong-Wook, an analyst with HI Investment & Securities. Samsung should expect a 15 percent overall hit, says Kim Ji-San, an analyst with Kiwoom Securities. Panasonic is much less exposed, with less than 1 percent of its EV battery sales coming from China, says Simon Yu, managing director at SNE Research.

Pushing local battery producers to make their NCM designs safer should also help them become more competitive against foreign companies, says Mark Newman, a senior analyst with Bernstein Research in Hong Kong. The suspension of subsidies “is very clearly a political step from China to give the domestic battery makers a chance to catch up,” Newman says.

The battery subsidies have already become a diplomatic issue between China and South Korea, threatening to overshadow the bilateral free-trade agreement the countries implemented last year. On March 19, Korea’s trade ministry said the Chinese government has agreed to consider a request to continue subsidizing NCM batteries. Chun Taekmo, a chief fund manager of Hyundai Investments, says there’s reason to believe China will relent, given how much more efficient a well-made NCM battery is, compared with its LFP counterpart.”

source: Bloomberg

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43 responses to "Samsung SDI and LG Chem Have A Battery Problem In China Where Subsidies Were Redirected To LFP-Type Cells"

  1. Ambulator says:

    That’s pretty sleazy operation by China. I hope they come to their senses.

    1. sven says:

      That’s par for the course.

      1. georges says:

        Trump for president 🙂

        (sorry couldn’t resist)

    2. deborah 007 says:

      Yep…So true

    3. Taser54 says:

      Typical action of the Chinese. They do similar things all the time -once a plant is built.

      They do everything they can to make the plant unprofitable, often resulting the plant in shutting down. Then the government snaps up the plant and a domestic manufacturer moves in to the plant.

      1. abc123 says:

        Personally, if I were Sammy or LG and I had to leave the plant, I’d demolish it first just to piss off the Chinese.

  2. Ian says:

    Is this why Buffet bet on BYD?

    1. Dragon says:

      Yesss, the all-powerful, all-knowing, WB surely knew this would happen back in 2008 when he bought 10% of BYD.

    2. Nick says:

      Yep. The Chinese government makes a powerful business ally.

      1. Anon says:

        And not, when it isn’t.

  3. ffbj says:

    Right. This is why doing business in China is a double edged sword. Except you are the one getting cut both ways.

    It will probably turn out that many Communist Party members have stock in the companies this ruling favors.

    1. SparkEV MD says:

      Communism in name only.

      1. przemo_li says:

        😀

        But it was Communism in name only always. Same for Soviet Russia.

        Soviet Russia broke down into pieces, and there is authoritarianism there morphing into totalitarianism.

        China was always totalitarianism. Nothing changed there.

      2. Fool Cells says:

        in name only? Communism is a horrible, abusive, corrupt economic system which makes capitalism look perfect, which it certainly is not, but it is by far the best system out there.

  4. pjwood1 says:

    South Korea needs Trump 😉

    1. Kdawg says:

      They can have him.

    2. t says:

      Send them him as soon as possible. Under condition that he will not return!

  5. Jychevyvolt says:

    Never trust Chinese government.

    1. SparkEV MD says:

      Never trust our government either.

      1. Nick says:

        I trust ours immeasurably more than China’s. And most others for matter.

        We have one of the least corrupt governments on earth.

        1. Anon says:

          The least corrupt government, appears to be Norway.

          Interesting that they also have the highest number of BEVs per capita, than everyone else.

        2. Lindsay Patten says:

          There are quite a few countries where giving money to politicians isn’t considered a constitutionally protected right.

  6. proxymusanonimy says:

    The same crap happens in the US. Nobody should be surprised!

    1. sven says:

      Bulls**t!

      1. Ev Blogger says:

        Really,Sc has tax incentives on Plugin Electric( only US Companies produce them right now) not Full electric(nissan,mit,early adpters).

        Simple login, when i am funding, my kids only needs to be benifited

      2. ffbj says:

        Right on Brother. While similar things happen here, elites preying on the populace, you don’t see companies installing nets to catch the suicides. In China corruption and graft are ingrained within the warp and woof of society.

        A few examples:
        The melamine baby formula scandal.
        The three gorges damn project.
        Ignoring building codes resulting in collapse when the inevitable earthquakes hit.
        The LL scandal, in cahoots with an American company.
        The vaccine scandal.Using expired vaccines.
        Countless toxic product scandals, usually childrens toys shipped to the U.S.

        There is no rule of law in China. No recourse to redress grievances, except through the worthless petition system.

        Its a question of scale.

        1. Anon says:

          Don’t forget: The biggest single lawsuit against a COUNTRY, was between the UK and CHINA– who shipped toxic fungicide-coated sofas and recliners that chemically maimed and killed British people sitting on them.

    2. Ian says:

      Yeah I seem to recal a little softwood lumber issue a while back between Canada and the US.

      1. G2 says:

        …and NAFTA was going to make an ‘even playing field’….

    3. martinwinlow says:

      The same thing happens everywhere – everywhere there are humans, anyway. The Chinese do seem to go at it with surprisingly blatant gusto, tho. But equally, if it goes wrong people who have been convicted of serious fraud in China have been executed… !

    4. Speculawyer says:

      Corruption definitely exists in the USA. However, not as big as in China where they don’t have free elections and a strong free news media.

      1. G2 says:

        By ‘free’ do you mean ‘owned by the largest conglomerate’??

        1. Martin T. says:

          Exactly the US new media is so worthless in news coverage these days – bought out by business it is the new Pravda (Old communist fantasy propaganda news paper)

          Sadly RT caries more detail and independent reporting now than the major US networks – now that is really both very sad & Shocking!

  7. Speculawyer says:

    Well that is pretty corrupt.

    They could at least try to rationalize by saying their LFP batteries are non toxic and thus will help improve China’s environment. And then everyone will laugh when they look out the window and just see smog.

  8. Speculawyer says:

    Well, Samsung . . . I think Tesla needs some batteries. 😉

    BTW, why can’t we comment on the E-racing story?

    1. Jay Cole says:

      …we are suppressing the Formula E fans, lol.

      Actually, not sure what happened there with the comment section/system on that one…just reformatted it to accept comments. Go crazy!

      Glad you pointed that out, we should have known something was up when it had no discussion after the first 30 mins or so.

  9. Just_Chris says:

    It’ll be great if this results in a flood of cheap NMC batteries into the market, especially with home energy storage systems just appearing. Expect a series of generous feed in tariffs in South Korea on home battery storage systems. Expect those systems to have to be NMC for some reason, like “we need a standard chemistry for recycling”

    I think this policy would also block US and EU bus companies from entering china. It would be pretty devastating if expanded to cars. The last thing we need is a trade war pushing the prices of EV’s up.

  10. Priusmaniac says:

    The good side is that it will make more batteries available for cars.

    The bad side is that again subsidies tend to be at once disrupted sending havoc the logic planning and inducing an overall insecurity for investment.

    1. Djoni says:

      Depending on which one you invest in!

      1. Priusmaniac says:

        Which one you invested in will determine if you win or lose but both the winner and the loser live under the same induced insecurity.
        Subsidies should always be as predictable and stable as possible and if they change, the change should be progressive not at once. Even a huge subsidy for ev would be negative since it would send the market out of its capacity and when it comes to an end it will cause a huge last minute buy and then a long zero buy starvation period afterwards.
        The Denmark ev case show that and in the US the 200000 ev mark is going to have similar effects.
        Norway, does it right by gradually changing help.

  11. Lindsay Patten says:

    Perhaps GM no longer needs to worry about battery supply if it wants to ramp up Bolt sales.

  12. telveer says:

    But of course .. what else would one expect from China?

  13. Battery Bro says:

    Typical tactics used by Chinese government and businesses. It is cut-throat but has always been a possibility that Samsung and LG have likely considered before opening the factory. I hope the news does not hit these two great companies too hard. Big private companies like BYD will always receive favors from the gov.