South Korea’s battery makers face a major setback in the world’s largest electric vehicle market as they would most likely to become unqualified for a government subsidy program that is essential to keep EVs affordable under a strengthened battery guidelines going effect as early as January next year.

According to multiple industry sources on Wednesday, China’s Ministry of Industry and Information Technology (MIIT) has recently announced a revision to its EV battery certification standard that will go into effect from 2017. The revision comes more than a year after the populous country introduced an EV battery certification system in March last year and began certifying manufacturers wishing to supply their products to green vehicle makers.

So far, certifications have been awarded to 57 companies through four separate reviews in June and December of last year and April and June of this year. Samsung SDI and LG Chem were excluded from the list in the four rounds of reviews. They had hoped to get green light on the fifth trial.

If the two Korean EV battery manufacturers do not receive certification this time, they would face major business setback in world’s largest EV market as EVs equipped with batteries from unlicensed manufacturers would not be subject to government subsidies. China’s Anhui Jianghuai Automobile Co. (JAC Motors), for example, had already announced recently that it will not install Samsung SDI’s lithium-ion batteries in its electric bus, citing concerns the cost upon losing EV subsidy.

Samsung SDI and LG Chem were expecting to receive certifications this year in the fifth review as they each put out efforts to fulfill necessary requirements such as running a production facility for at least a year and having 10 percent or more of their total workforce dedicated to research and development. The hopes were dashed by the new guidelines made impossible for the two to meet within time.

The MIIT plans to gather public opinion on its revised certification standard before enforcing changes in January 2017. The latest revision is focused on restricting the industry to prevent it from being flooded with random battery manufacturers. Under the new guideline, EV battery manufacturers must have annual output capacity of 8 gigawatt-hours and their battery packs should not have reported any faulty over the past two years. China-based manufacturing facilities of Samsung SDI and LG Chem at best yield 2 to 3 gigawatts. SK Innovation does not have a manufacturing base in China. None of them would be able to meet the new standards before the next review.

Beijing will conduct a fresh review based on the tougher guidelines and apply them from January. The four past licenses would become invalid.

By Jung Wook

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