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SEOUL, June 13 (Yonhap) -- LG Chem Ltd., South Korea's top chemicals company, said Thursday it will establish an electric vehicle (EV) battery joint venture (JV) with Geely Automobile Holdings Ltd. in China in a push to tap deeper into the neighboring country's fast-growing EV market.
Under their agreement signed in Ningbo, Zhejiang province, China, on Wednesday, LG Chem and Geely Automobile agreed to establish a 50:50 venture. LG Chem and Geely will each chip in US$87 million.
The construction of their EV battery plant with a capacity of 10 gigawatt hours will start later in the year, according to LG Chem.
The South Korean company said EV batteries from the joint venture will start being placed in autos to be produced by Geely in 2022.
Geely Automobile, the No. 1 local brand in China, with 1.5 million units sold in 2018, aims to have 90 percent of its autos run on electricity in 2020.
LG Chem said the latest deal will expand its presence in the world's top EV market and ensure a stable supply of EV batteries. The company said it will actively seek JVs with other global automakers for EV battery production.
Geely Automobile is a subsidiary of Zhejiang Geely Holding Group, which also owns brands like Swedish luxury carmaker Volvo and British sports car manufacturer Lotus.
South Korean EV battery makers have been moving into the Chinese market aggressively in recent years after Beijing announced that it will halt its EV subsidy program by the end of 2020.
Since 2016, the Chinese government has been providing subsidies for EV cars with China-made batteries only in order to protect local players. But with such regulation set to be scrapped in the coming years, industry observers said South Korean companies will further seek partnerships with Chinese EV makers for a stable battery supply.
LG Chem's smaller local rival, SK Innovation Co., recently decided to invest 580 billion won to build its second EV battery plant in China. It has already started to build its first plant, a 7.5-Gwh capacity EV facility, in Changzhou, Jiangsu Province, China, along with BAIC Motor Corporation., Ltd. and Beijing Electronics Holding Co., Ltd.
In addition, Samsung SDI Co., another Korean EV battery maker, said it will invest 1.3 trillion won to set up battery production bases in Xian and Tianjin.
South Korean EV battery makers are currently far behind their Chinese rivals.
China's Contemporary Amperex Technology Co. Limited (CATL) and BYD Co. together occupied 46.4 percent of the global EV battery market in April, while the combined market share of LG Chem, Samsung SDI and SK Innovation stood at just 14.7 percent, according to industry data.
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