Foreign manufacturers begin expanding into Chinese market to seize opportunities

Updated 2017-12-19 14:00:18 Global Times

Toyota Motor Corp and Panasonic Corp announced a battery business partnership agreement on Wednesday, with those batteries expected to be used in EVs produced by Toyota's JVs in China. Experts say it is unlikely to pose too much pressure on domestic independent automotive lithium-ion battery makers such as BYD and CATL. However, thanks to the rapid development of the new energy battery sector, it is becoming a growing trend for more and more leading global battery manufacturers to begin expanding into the Chinese market. Meanwhile, experts also say foreign companies are still facing heavy pressure to cut costs in order to compete with local producers.

Amid fierce competition among automotive battery manufacturers to win larger market shares, Toyota Motor Corp announced a partnership agreement with Panasonic Corp on Wednesday to begin studying the feasibility of a joint automotive prismatic battery business.

The move is considered Toyota's great ambition in the Chinese market, as it is very likely that the batteries will be used in new-energy vehicles (NEVs) produced by Toyota's joint ventures (JVs) in China.

Toyota recently announced that it will make more than 10 electric vehicle (EV) models globally in the early 2020s, with sales starting in China, Reuters reported on Monday.

What influence will this move pose to domestic battery manufacturers?

Leading domestic battery manufacturers BYD Auto Co and Contemporary Amperex Technology Ltd (CATL) declined to comment when reached by the Global Times on Thursday.

But industry expert Zheng Jiatu, deputy managing director of the China Electric Vehicle Charging Technology and Industry Alliance, said that the deal is unlikely to pose too much influence on domestic battery brands.

With China's NEV market looking good to Toyota, the Japanese manufacturer hopes to enter into the sector. "As far as I know, the batteries are very likely to be used in NEVs produced by Toyota's JVs like Tianjin FAW Toyota Motor Co and GAC Toyota Motor Co rather than be directly sold in the Chinese market," Zheng told the Global Times on Sunday.

On December 11, Japanese financial newspaper Nikkei Asian Review reported that Panasonic will start to mass produce batteries for electric motorcycles and low-speed EVs at its lithium-ion battery plant in Wuxi, East China's Jiangsu Province, and may even supply them to Chinese companies due to the rising demand of batteries in the country.

Liu Yong, secretary-general of the Energy Storage Applications Branch of the China Industrial Association of Power Sources, said that it is still difficult to measure to what extent the expansion of global leading brands will influence domestic makers as their competitiveness is strong after years of development.

But the presence of foreign-backed battery makers could boost technological upgrading of lithium-ion batteries in China, Liu said.

Currently, leading Japanese and South Korean battery manufacturers produce nickel manganese cobalt (NMC) batteries, while their Chinese counterparts mainly focus on lithium-iron phosphate (LFP) batteries. The latter has lower capacity density and shorter driving mileage, but is safer.

Growing competition

Panasonic is currently the world's biggest supplier of batteries for plug-in hybrid vehicles and EVs. In the first half of this year, Panasonic took up a 29 percent market share, followed by South Korean battery maker LG Chem Ltd with a 13 percent share, and Chinese brands BYD and CATL with shares of 10 percent and 9 percent, respectively, data from the Nomura Research Institute showed.

Panasonic considers the battery business central to its goal of doubling its automotive business revenue to 2.5 trillion Japanese yen (.05 billion) by March 2022, Fortune reported on Thursday. To realize that goal, it has been expanding its battery production capacity across the world.

Domestic battery maker BYD, based in Shenzhen, South China's Guangdong Province, has been investing in research and development as well as the manufacturing of NMC batteries to complement its LFP batteries.

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