Hyundai Motor's Kona Electric / Courtesy of Hyundai Motor



By Nam Hyun-woo



Hyundai Motor will use Chinese firm's batteries in its electric SUV scheduled to debut in China later this year. The company plans to take advantage of Beijing's electric vehicle (EV) battery subsidy policy to promote local manufacturers, industry officials said Sunday



According to the officials, Hyundai will use batteries made by China's Contemporary Amperex Technology (CATL) for the upcoming electrified version of the Encino, which is the Chinese version of the Kona.



Hyundai has been using LG Chem batteries for the Kona Electric, produced for the Korean and European markets, but decided to power the SUV with CATL batteries to benefit from the subsidy.



"The move seems to be a response to the Chinese government's prolonged policy of giving subsidies only to those who work with home players," one of the officials said. "Though the Chinese government says it will phase those subsidies out completely after 2020, Hyundai Motor decided to embrace Chinese batteries early in a bid to avoid uncertainties."



Since 2016, Beijing has been offering a subsidy for the purchase of EVs excluding those powered by batteries made by Korean companies, in a bid to boost local manufacturers.



This has helped China become the largest EV market in the world, but came alongside a "virtual sales ban" for Hyundai Motor and Kia Motors' vehicles due to price differences.



The Chinese government has pledged to scale back the subsidies and phase them out completely after 2020, and provided cuts guidelines in March, but Korean EV manufacturers and battery makers remained concerned over uncertainties surrounding these.



In April, the Chinese government announced Chinese EVs using batteries produced by LG Chem and Samsung SDI had passed preliminary approval for subsidies worth nearly 10 million won ($8,390), but the firms failed to make it onto the final list.



"Though the Chinese government said it will scrap the subsidy policy, a replacement regulation could be implemented," said an official at a Korean carmaker.



Beijing's new requirements for carmakers to meet new energy vehicles (NEV) quota this year is another reason why Hyundai Motor decided to use CATL batteries and speed up the introduction of the Encino.



From this year, carmakers in China will be required to earn NEV credits equal to 10 percent of the number of their non-NEV sales in China. This means a company selling 100,000 cars in China has to earn 10,000 credits, and different points are given to each car depending on how eco-friendly it is. The percentage will rise to 12 percent next year.



If the company fails to meet the requirement, it has to fill the shortage by purchasing the credits from carmakers that have surpassed the 10 percent minimum. Last year, Hyundai and Kia each sold 4,100 and 4,383 eco-friendly vehicles in China, which account for 0.5 percent and 1.2 percent of their total sales, respectively.



"Global carmakers including GM, BMW, Mercedes-Benz, Volkswagen and others also use CATL batteries for their EVs in China," the official said. "Time was running out for Hyundai to sell EVs in China and it seems that the company decided to embrace Chinese batteries for that reason."



