* Supplying electronic vehicle batteries to China, is Europe next?

Batteries to be supplied to Chinese No3. automaker from 2H10, LG Chem aims to expand its customer base to 10 automakers in the US, China and EU.

According to media reports on Feb 5, LG Chem established a strategic alliance with CAMC, Changan Automobile’s (Changan) new automobile energy subsidiary, to supply hybrid-car batteries. LG Chem plans to supply lithium-ion batteries to CAMC from 2H10. Changan is a major automaker in China and sold 1.87mn vehicles, totaling RMB21bn (W3.6trn) in 2009. The automaker was the first in China to develop full-hybrid vehicles based on nickel-hydrogen batteries. Changan launched the ‘CV11,’ a hybrid van in June 2009 and plans to release a sedan, named ‘CV8’ in March 2010. Both models are currently equipped with nickel-hydrogen batteries but the batteries will be replaced with lithium-ion batteries in 2H10.

Bahnsuk Kim, the vice-chairman of LG Chem, said, “We want the electronic vehicle battery business to make money in the early stage, so that we can retrieve our research and development investment,” at the business results presentation on Jan 29. He also mentioned that the company would double its customers by securing European, American and Chinese manufacturers. LG Chem added Changan to its list of customers following Hyundai/Kia (Avante, Forte), GM (Chevrolet Volt, Buick), CT&T (urban electronic vehicles) and Eaton (commercial vehicles). We think the company’s expansion strategy is sound for the following reasons: 1) it is placing itself in the advantageous first-mover position in a fast-growing market, 2) it should be able to curtail the investment retrieval period and 3) it can reinforce its bargaining power as an independent battery maker among automakers and auto parts manufacturers, which are strengthening their bargaining power. Thus, we believe the company is taking the right steps as a leading global mid- to-large sized battery company. We expect LG Chem to add Ford and European automakers to its list of customers. LG Chem has supplied batteries to Hyundai and Kia since July and September 2009, respectively.