China Extends Battery Subsidies for 2 Years... Will Domestic Battery Industry Face a Sudden Crisis?

[Asia Economy Reporter Park So-yeon] The battery business, the only breakthrough for the refining and petrochemical industry facing a crisis due to the sharp fluctuations in international oil prices and the decreased demand for petroleum products caused by the novel coronavirus disease (COVID-19), has also been blocked by the protectionist policies of major powers favoring their domestic companies.

Due to the economic downturn, China has postponed its subsidy policy for electric vehicle battery companies, and the United States has eased environmental regulations to favor internal combustion engine vehicle manufacturers, leading to analyses that these policy changes will negatively impact the performance of Korean battery companies.

According to the industry on the 3rd, the Chinese government extended the deadline for abolishing subsidies for new energy vehicle purchases by two years, from the end of this year to the end of 2022. As the Chinese automobile industry suffered a significant blow from the COVID-19 crisis, the subsidy system is being maintained to protect domestic industries.

As a result, it is analyzed that Korean companies will find it difficult to take an aggressive stance on pricing policies due to the Chinese government's subsidy policy postponement. LG Chem, Samsung SDI, and SK Innovation had been rushing to build large-scale battery factories in China and preparing for order competitions to dominate the Chinese battery market by leveraging product competitiveness since 2020, when subsidies were scheduled to be abolished.

The U.S. government has also significantly eased automobile exhaust emission standards to protect domestic companies. This is a concern for the battery industry, which would benefit from expanded electric vehicle orders if environmental regulations were strengthened.

The U.S. Department of Transportation changed regulations to relax the fuel efficiency standards that automobile manufacturers must achieve, lowering the required fuel efficiency from 54.5 miles per gallon (23.2 km/L) in 2025 to 40.4 miles per gallon (17.2 km/L) by 2026.

This measure prioritizes supporting internal combustion engine vehicle manufacturers rather than electric vehicles and could slow the growth of Korean companies supplying batteries to electric vehicle companies such as Tesla and Lucid Motors.

In Europe, there is a possibility of easing carbon dioxide emission regulations for gasoline vehicles due to the COVID-19 shock.

The European Automobile Manufacturers Association (ACEA), along with the European Association of Automotive Suppliers (CLEPA) and the European Council for Motor Trades and Repairs (CECRA), recently sent a letter to the European Union (EU) Commission requesting a relaxation of carbon dioxide emission regulations.

The EU has set a limit that the average annual carbon dioxide emissions per vehicle sold should not exceed 95g/km starting this year, but European automakers stated in the letter that they are struggling to meet this standard due to the spread of COVID-19.

An official from the refining and petrochemical industry said, "The industry has been hit hard by oil prices and COVID-19 and is collapsing, and aggressive expansion of the battery business has also become difficult, but we are somewhat envious that overseas competitors are actively receiving support from their governments," adding, "We are looking forward to bold policy support from our government that can send a clear signal to the market."

This content was produced with the assistance of AI translation services.