The Chinese government decided to extend subsidies only to electric buses which employ lithium ferrophosphate (LFP) batteries. This move is interpreted as a move to extend support only to local battery makers to the exclusion of foreign suppliers.
Chinese battery makers, including BYD and Amperex Technology Ltd., have no capabilities in manufacturing nickel cobalt manganese (NCM) batteries which are now dominant in the international battery market.
The Korean government and business communities see this move in violation not only of the provisions of the Korea-China Free Trade Agreement which was signed about a month ago, but also against the World Trade Organization's ban on the establishment of new technical barriers to trade.
The Chinese government's latest decision placed at high alert Korea's major battery companies, including LG Chem and Samsung SDI which invested hundreds of millions of dollars at the end of last year to set up new plants in China, plus SK Innovation which runs a joint battery plant in China.
China, which is suffering from the problem of severe air pollution, is focusing on expanding the market for electric cars. China has grown into the world's largest electric car market last year when 250,000 electric cars were sold, higher than 180,000 units in the United States. The electric car battery market also expanded to 36.5 billion yuan (US$5.54 billion) last year from 10.3 billion yuan in 2014.
