LG Chem Looks To Cash In On China's Electric Car Push

International Business Times

Published Jul 02, 2014 10:33AM ET

Updated Jul 02, 2014 11:00AM ET

LG Chem Looks To Cash In On China's Electric Car Push

By Maria Gallucci - As China fights to curb the dirty air engulfing its cities, South Korean manufacturers are looking to cash in on the cleanup by expanding their production of electric car batteries.

LG Chemicals (KS:051910) Ltd signed a preliminary agreement on Wednesday to build a rechargeable battery factory in China’s eastern city Nanjing by the end of next year. The battery giant said it plans to invest hundreds of millions of dollars in the plant, which when completed will have the capacity to produce batteries for more than 100,000 electric cars per year, LG Chem said in a statement.

The Korean company will operate the plant in partnership with two Chinese-controlled companies. LG Chem will own half of the joint venture, while the other half will be unevenly divided between the two Nanjing-based firms. LG Chem declined to disclose the total amount of investment by all three parties, Wall Street Journal reported.

The Nanjing plant is expected to generate nearly $1 billion in total sales between 2015 and 2020, LG Chem said.

The battery factory could give LG Chem an early edge in the burgeoning market for emission-free vehicles in China, according to analysts. While demand for electric cars has so far been sluggish in the world’s largest car market, Chinese sales are expected to pick up in the coming years thanks to government targets to put 500,000 plug-in cars on the road by 2015 and 5 million vehicles by 2020.

“[LG Chem’s] expansion into China is positive in that it can gain early access to a potentially huge market, as demand for electric vehicles is expected to take off after 2015,” Lee Ji-Yeon, an analyst at Taurus Securities, told Financial Times.