May 2, 2017 5:00 pm JST

Hyundai chooses Chinese battery supplier

Decision comes amid THAAD repercussions and falling sales in China

KEN MORIYASU, Nikkei deputy editor

Hyundai, along with other South Korean brands, has seen a dent in China sales recently.

TOKYO -- South Korean automaker Hyundai Motor has chosen a Chinese battery supplier for the first time.

Fujian-province based Contemporary Amperex Technology Co. Ltd. (CATL) will provide batteries for Hyundai's plug-in Sonata sedans, expected to hit the Chinese market in the first half of 2018, according to China's official Xinhua news agency.

The Sonata plug-in hybrid electric models will have both an internal combustion engine and an electric motor.

The move comes as China intensifies its drive to promote new energy cars and tackle air pollution. A draft regulation being circulated within the Chinese government would require as much as 8% of global car makers' China sales to be electric vehicles next year. An earlier draft had that mandate rising to 10% in 2019 and 12% in 2020. Carmakers are reportedly pushing back.

Furthermore, in a bid to promote domestic battery producers, the Chinese government has limited companies eligible for subsidies to those who have passed Chinese safety standards.

"It is highly possible that China will further strengthen regulations so that only made-in-China batteries can be used for EVs sold in China," said Hiroyasu Koma, president of GLM.

GLM, a Kyoto University-spawned company, plans to sell its four-seat G4 in China when the sports car, dubbed the "the Ferrari of electric vehicles," hits the market in 2019.

China is already the world's largest electric car market, selling 300,000 annually. The government's latest five-year plan aims to increase the number to 5 million a year by 2020.

China has been a headache for Hyundai in recent months. The company saw its China retail sales slump 14% in the first quarter, dented by anti-Korea sentiment in the wake of Seoul's decision to deploy a U.S. anti-missile system.

The slump is worrying as Hyundai prepares to launch its fifth Chinese factory in Chongqing this summer. The battery partnership with CATL is both an effort to strengthen ties with the Chinese government and to avert any risk that could emerge from sudden policy changes that target foreign automakers.

"We selected CATL as our first Chinese battery partner as Hyundai seeks to diversify its supplier base," a Hyundai official who declined to be identified told Xinhua.

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