OSAKA -- Panasonic will construct a 50 billion yen ($412 million) Chinese factory for automotive lithium-ion batteries.
The plant in the northeastern city of Dalian, Liaoning Province, will churn out rectangular-shaped batteries for electric vehicles and plug-in hybrids. It is expected to go online in 2017 via a joint venture with a Chinese partner.
Panasonic already manufactures personal computer batteries in China, but this will mark its first dedicated plant for electric-vehicle batteries. Annual capacity is projected at the equivalent of around 200,000 electric vehicles.
The Chinese government is promoting environmentally friendly vehicles, including electric cars, as the country struggles with severe air pollution. Panasonic is the world's biggest producer of automotive lithium-ion batteries, with a global market share of 45.7%, and is also building a U.S. facility with Tesla Motors. With the planned move in China, the Osaka-based company aims to solidify its footing in these two key markets.
Green cars in demand
Demand for electric vehicles and plug-in hybrids is strong in China, helped by green-auto subsidies of up to 55,000 yuan ($8,505) per vehicle.
Such domestic manufacturers as BYD and state-owned Beijing Automotive Group have been actively rolling out such autos. Foreign carmakers including Nissan Motor and Volkswagen are also stepping up Chinese production of them.
Market research company Fuji Keizai forecast in the summer that China's market for electric vehicles and plug-in hybrids would expand 650% from 2015 to 2025, reaching 650,000 units. Actual growth so far has outpaced such projections.
Chinese production of electric vehicles and plug-in hybrids more than quadrupled on the year to 290,000 units for the January-November period, according to the China Association of Automobile Manufacturers. The full-year volume may top 350,000, the trade group says.
2 key markets
South Korea's LG Chem, the third-largest supplier of automotive lithium-ion batteries, opened a plant in the Jiangsu Province city of Nanjing this October. Panasonic wants to establish its own production base in China to increase supply to automakers. The aim is to generate annual sales of 100 billion yen from the business there.
Chinese investment by Japanese companies has been declining since 2013, partly on a territorial spat fueled by Japan's 2012 nationalization of disputed islands in the South China Sea.
Trading house Itochu decided this year to pour 600 billion yen into a unit of state-owned conglomerate Citic, and automakers spend 50 billion yen to 60 billion yen on expanding production facilities. But Panasonic's latest investment is notably large for a manufacturer that does not build cars.
In the U.S., a portion of the $5 billion lithium-ion-battery plant Panasonic is building with Tesla will go online next year. The facility is expected to be churning out enough batteries for half a million electric vehicles in 2020.
Panasonic seeks to increase earnings by focusing on its strength.
China is eagerly welcoming foreign investment to shore up its sluggish economy and absorb advanced technologies from overseas companies. Foreign manufacturers may have to take steps against unintended technology outflows.