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China's BYD increasing battery production capacity amid policy push

BYD hybrid electric SUV model Yuan is displayed during the Auto China 2016 auto show in Beijing, China April 26, 2016. Photo: Reuters

BYD, one of the leading electric car manufacturers in China, has set up a joint venture company with Changan Automobile to expand its car battery supply chain, amid growing demand for electric vehicles.

According to a strategic cooperation agreement signed recently, the joint venture will have a production capacity of 10 gigawatt hours of car batteries, and will be based in the central Chinese city of Chongqing. The goal will be achieved in two stages, with the production in the first stage reaching 5-6 gigawatt hours and the second stage adding the remaining 4-5 gigawatt hours, according to the agreement.

Wang Chuanfu, chairman and president of BYD, described the partnership with Changan Automobile as his company's first step to sell car batteries to other automakers, compared with the past when BYD differentiated itself from other carmakers with its self-sufficiency in battery supply.

BYD said that Changan Automobile will be a shareholder of its car battery subsidiary.

With the sales of car batteries becoming a key profit point, BYD has started holding talks with some automakers from home and abroad for cooperation on car battery production and sales, according to a report by Caixin, a business news portal in China.

BYD is seeking opportunities to establish joint venture companies with more carmakers to sell car batteries and is considering the introduction of strategic investors in car battery production, according to the Caixin report.

The announcement of the partnership with Changan Automobile comes a week after BYD said that it was building what it calls the world's largest car battery factory in western China's Qinghai province.

The Qinghai plant, which will use robots to handle logistics and manufacturing and will be fully operational in 2019, will have an annual capacity of 24 gigawatt hours, which will be enough to power 1.2 million BYD Tang electric cars.

BYD has set a plan to increase its car battery production capacity fourfold by 2020, with Wang previously saying that all new BYD-branded cars are expected to be battery-powered in 2030 at the earliest.

The expansion of car battery production capacity reflects Wang's confidence in the "explosive development of the new energy vehicle industry in China."

By 2020, China's new energy vehicle market is set to see an average annual growth rate of 46 percent, with the annual production capacity reaching 2.5 million, higher than the goal set by China's Ministry of Industry and Information Technology of 2 million electric cars by 2020, according to a report released by JPMorgan Chase & Co.

China is expected to account for 59 percent of global electric car sales by 2020 and 55 percent by 2025 to maintain its position as the world's largest electric car manufacturer, shows the report.

Besides battery production, BYD will also work with Changan Automobile to conduct research on autonomous driving, fast charging technology, recycling of car batteries and other future battery technologies.

Since the end of last year, when BYD revealed its intent to expand production to sell car batteries to other carmakers, the company has started opening its supply chains including driving system and Internet-connected system.

In China, BYD and Contemporary Amperex Technology are considered as the two largest car battery producers, with the latter growing as an important car battery supplier to a number of big car manufacturers.

Contemporary Amperex Technology, which has recently completed its initial public offering at the Shenzhen Stock Exchange, aims to become the world's largest car battery producer by 2020. Recently, the Ningde-Fujian province company joined hands with Honda Motor to develop a new battery that will equip the Japanese carmaker's flagship electric car models scheduled to be rolled out in the Chinese market by 2020.

Currently, the Chinese government offers massive subsidies to domestic car battery producers in its drive to promote the production and use of electric cars, and is studying the timetable for the suspension of production and sales of gasoline-powered cars in the country.

Earlier this month, the National Development and Reform Commission, China's top economic planner, was reported to be gathering public opinion on a planned management regulation which is aimed at banning the establishment of new gasoline-powered car plants and increasing the technological requirements for electric car manufacturers in the country.

In 2019, the Chinese government will adopt an industrial policy, which will require carmakers to produce a large proportion of pure electric cars and plug-in hybrid vehicles, increasing the demand for bigger supply of car batteries.

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