The threat of conflict on the Korean Peninsula is being cited as the reason why a collaboration between a Chinese EV car maker and SK innovation has ground to a halt.
But the real reason the suspension of all operations at the Beijing Electronic Holding & SK Technology Co., Ltd. (BESK) is more likely to be protectionism and not retaliation for South Korea’s decision to deploy the US made THAAD anti-missile system.
It could be that China’s economic retaliation measures towards South Korea might have already spread from tourism and logistics into manufacturing.
SK Innovation stated last month that the Beijing factory has been at a halt since early this year.
The company established BESK in 2013 in partnership with China’s Beijing Auto and others. The site had been used for assembly and packaging of imported electric car battery cells produced at SK’s Seosan factory in South Chungcheong Province for supply to Beijing Auto.
SK is the second largest shareholder, with a 40% stake. “Operation and management of BESK is determined according to the strategy of partners such as Beijing Auto, who hold a 60% stake. It is therefore inappropriate to interpret [the halt] as being directly tied to THAAD,” SK said.
SK also said there were “no setbacks in operation of Seosan factory, where the production line for Beijing Auto cells is switched to supplying to other clients.”
But sources suggested the halt to the Beijing factory’s operations are more likely to be connected to the Chinese government’s decision in late 2016 to cut subsidies for South Korean-produced electric car batteries.
“Late last year, the Chinese government issued guidelines pressuring China automobile companies, with the message of ‘Are you going to continue insisting on using batteries produced in South Korea?'” an industry source said.
Two other electric car battery companies, LG Chem and Samsung SDI, are also suffering. Since early this year, fears of losing out on government subsidies have prompted Chinese automobile companies that once used South Korean cells to drastically cut their South Korean battery orders.
As a result, operation rates at LG and Samsung factories in Chinese cities like Nanjing and Xian have hit rock bottom. Both LG and Samsung have already been included by the Chinese government as ineligible for battery subsidy payment.