China’s protectionist laws are currently being relaxed when it comes to electric vehicles, but there are still some rigorous restrictions. For example, Chinese electric vehicles need to be powered by Chinese batteries.
A new report now shows that Geely found a workaround for Volvo’s electric vehicles by using Korean batteries made in China and the competition isn’t happy about it.
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China has some of the most generous electric vehicle incentives in order to accelerate EV adoption in an attempt to curb their air pollution issue.
But for a vehicle to be eligible for those incentives, it needs to be approved by authorities and for some subsidies, it includes being manufactured in China with Chinese batteries.
According to a report from the Wall Street Journal, Geely set up a subsidiary called Zhejiang Henguyan, which licenses and makes the exact same high-end batteries made by LG Chem in Korea.
The report revealed:
“A Geely spokesman confirmed that it struck a deal late last year to license LG battery technology, and that LG Chem has helped Hengyuan set up a production line. The batteries will also be used in cars made by another Geely brand, Lynk & Co., the spokesman said.
“This isn’t the use of a loophole or a back channel,” he said, adding that other companies “with the proper foresight could realize and create the same deal if required.”
Yet, other foreign companies are now complaining to the government claiming that it is an unfair advantage.
While it’s unclear if it’s actually a loophole that needs to be fixed or simply something that the rules actually encourage since the batteries end up being produced in China. However, foreign companies claim they can’t do the same as Volvo because the Swedish automaker is unfairly treated due to the Chinese connections of its Chinese owner Geely.
Volvo CEO Hakan Samuelsson admitted last year that Geely allowed them to get control over their business in China:
“This is our second home,” Mr. Samuelsson said in response to a Journal question during a round-table interview last year. “We are the only [foreign auto] company that really has control over business” in China.
It looks like the tension is increasing as China’s ZEV mandate is starting next year and foreign automakers want to solidify their place in the biggest auto market in the world.
I find it hard to see the issue here. Of course, automakers want to use the best chemistry possible for their EV batteries.
I am no fan of China’s protectionist rules and I know they want to give advantages to their own battery companies, but if the Korean battery makers end up making their own batteries in the country instead of importing them, how can you not call that a win?
Now it becomes an issue if only one automaker can benefit from this, but the issue is not clear at this level. It will be interesting to see how they will react to Tesla’s upcoming Gigafactory in China, which if it ends up being a similar deal as Tesla’s Gigafactory 1 in Nevada, it will make batteries developed by Japan’s Panasonic and USA’s Tesla.
I think the current complaints are a consequence of automakers panicking over the ZEV mandate in China.
Until they open up the market, we are likely going to see a lot more of this nonsense.