China Extends Electric Vehicle Subsidies for 2 More Years... Benefits for Korean Battery Industry

[Asia Economy Beijing=Special Correspondent Park Sun-mi] China’s electric vehicle subsidy program, originally set to end this year, will be extended for two more years. This measure aims to support the automobile industry, which has been weakened by the spread of COVID-19.

According to Xinhua News Agency on the 1st, Premier Li Keqiang held a Standing Committee meeting the previous day and announced that the deadline for subsidies and registration tax exemptions for new energy vehicles will be extended by two years from this year to promote automobile consumption. In China, electric vehicle subsidies can account for up to half of the vehicle price. Therefore, without these subsidies, electric vehicle sales are bound to decline.

China had initially planned to provide subsidies only until the end of this year for new energy vehicles such as electric and hybrid cars, and then abolish the subsidies. However, due to the US-China trade war and the contraction of the consumer market caused by the spread of COVID-19, the Chinese automobile industry faced a crisis of sluggish sales.

The Chinese automobile market, which experienced negative growth consecutively in 2018 and 2019, recorded a cumulative automobile sales volume of 2,238,000 units from January to February this year, a 42.0% decrease compared to the same period last year amid the COVID-19 outbreak. Additionally, among the vehicles sold in February, new energy vehicles such as electric cars numbered 12,908 units, a sharp decline of 75.2% compared to the same period last year.

With China fostering its domestic battery companies and the gradual reopening of the Chinese market to Korean companies’ electric vehicle batteries following the high-altitude missile defense system (THAAD) conflict between Korea and China, the news of the extension of the electric vehicle subsidy program is expected to be a positive development for the Korean battery industry.

If China delays the end of electric vehicle subsidies by two years and electric vehicle sales increase, the shipment volume of batteries from Korean companies is also likely to rise. Following the inclusion of electric vehicles equipped with LG Chem and SK Innovation batteries on China’s electric vehicle subsidy recommendation list in December last year, the March list this year included the Tesla Model 3 equipped with LG Chem batteries and the Chongqing Jinkang SUV model equipped with Samsung SDI batteries.