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LG Chem breaks ground on 2nd EV battery plant in China

Korean group to invest $1.8bn in Nanjing as ties with authorities warm

An employee charges an electric vehicle at a charging station in the Chinese city of Liuzhou.   © Reuters

SEOUL -- LG Chem is adding new production capacity in China, where Beijing hopes to create a world-leading electric vehicle industry and supply chain.

The South Korean company on Tuesday hosted a groundbreaking ceremony for its second electric-vehicle battery plant in Nanjing. It plans to invest 2.1 trillion won ($1.8 billion) at the site by 2023.

By the end of 2019, LG Chem expects the factory to be able to produce 500,000 batteries a year. The plant will supply electric-vehicle makers in China and other Asian markets.

The event was attended by Chinese Communist Party dignitaries, including Nanjing party Secretary Zhang Jinghua and Commercial Affairs Commissioner Xu Shuhai. Their presence shows how relations with Chinese authorities are improving. Last year, electric cars equipped with batteries from South Korean makers were excluded from a list of vehicles eligible for state subsidies.

"We will make our second factory in Nanjing the best in the world by investing state-of-art technology and facilities," said Park Jin-soo, vice chairman and CEO of LG Chem. "The new factory is given a mission to cope with quickly growing EV battery demand around the world."

SNE Research of South Korea forecasts that the global electric-vehicle market will swell to 6.1 million units in 2019, 10.8 million in 2021, 16.2 million in 2023 and to 22.1 million in 2025.

China's electric-vehicle battery market is dominated by Chinese players. According to data from SNE Research, CATL was the country's largest battery maker, accounting for 42% of the market in the first half of this year. BYD was next at 21.6%.

LG Chem CEO Park Jin-soo, fourth from left, stands with guests at a groundbreaking ceremony at the site of the company's second EV battery factory in Nanjing, China, on Oct. 23.

With less than 0.5% of the market, LG Chem did not make it into the top 20.

After the U.S. in March 2017 installed missile defense systems in South Korea in reaction to North Korean ballistic missile and nuclear tests, Chinese authorities exacted a price from South Korean companies with silent sanctions.

Earlier this year, the two countries agreed to resolve their differences as Seoul promised Beijing that it would not join a U.S.-led missile defense system.

Nanjing is close to the city of Wuxi, where LG has a joint venture that supplies cobalt, a key battery material.

With the second Chinese plant, LG Chem will have five production lines for electric-vehicle batteries around the world -- two in China and one each in South Korea, the U.S. and Poland.

Analysts say LG Chem is well-placed to ride a global electric-vehicle wave. The industry is forecast to grow 5% to 8% for the three years beginning in 2020. In 2017, it grew 1.5%.

"We see considerable upside potential for EV battery industry growth," said Cindy Park, an analyst at Nomura. "LG Chem is one of the key beneficiaries, and is financially and operationally supported by a solid chemical business."

LG Chem's client list is growing. Earlier this month, the company announced that it signed a deal with Volkswagen and will begin offering batteries to the German automaker at the end of 2019. LG's current customer lineup includes its compatriots Hyundai Motor and Kia Motors as well as U.S. automakers General Motors, Ford and Chrysler. In Europe, it sells to Audi, Daimler, Renault, Volvo and Jaguar.

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