SEJONG, Feb. 23 (Korea Bizwire) – South Korea will lodge a formal complaint against China over its new battery subsidy rules found to be unfavorable for South Korean companies at bilateral trade talks next month, the trade ministry said Tuesday.
China revised its subsidy rules last month to stop offering incentives to producers of nickel-cobalt-manganese batteries, or NCM batteries, citing safety issues. The NCM battery industry is currently dominated by South Korean battery makers, including Samsung SDI Co. and LG Chem.
At the same time, the modified rules provide incentives to lithium iron phosphate batteries used in electric buses, which are mostly sold by Chinese firms, in an apparent move to boost its local manufacturers and isolate their South Korean rivals.
The two South Korean companies have expanded production facilities in order to tap deeper into the fast-growing Chinese electric vehicle market. Their Chinese sales account for about 30 percent of their annual revenue.
Without the government subsidies, they may have to pull out of the Chinese market as the price of an electric bus is largely reduced by some 180 million won (US$146,200) from 200-300 million won with government support.
“We have sent letters to the Chinese government and met the Chinese ambassador to Korea to bring up the issue,” Vice Trade Minister Woo Tae-hee said in a monthly briefing. “The issue has been included on the agenda at the upcoming trade minsters’ meeting between Seoul and Beijing next month.”
Trade ministers from both countries will have their first bilateral meeting on March 17 in Beijing for the first time since the bilateral free trade pact took effect in December last year.
“South Korean batteries are safe. They haven’t caused any problems in China in the past 10 years,” said Woo. “China should have informed our companies of rule changes. We will keep trying to persuade the Chinese side.”
Since the Chinese government’s announcement, the South Korean battery makers have suffered a sharp drop in their stock prices. Shares of LG Chem plunged some 15 percent last month, while Samsung SDI tumbled more than 25 percent.’