LG Chem wins EV contract with Volkswagen

South Korea's LG Chem has won a contract to supply electric vehicle (EV) batteries to German automaker Volkswagen, lining up a key European customer amid continuing struggles to compete for sales in China.

Deliveries of EV batteries to Volkswagen will start around the end of 2019, LG Chem said. Terms were undisclosed. Pricing and the number of batteries that Volkswagen will order are flexible and will depend on market conditions, LG Chem said.

The South Korean company, which already has contracts with such carmakers as Renault and Volvo, is tripling the annual output capacity of its EV plant in Poland to 300,000 units. Rivals SK Innovation and Samsung SDI, which chose Hungary for their European battery plants, also are targeting the continent for growth in their EV businesses.

The outlook is bleaker in China, where Beijing has again excluded EVs with South Korean batteries from a list of vehicles that qualify for government subsidies. The exclusions began in 2016 and have put South Korean battery producers at a competitive disadvantage in the world's biggest EV market.

China's consumer EV subsidies, which are among the most generous in the world, are scheduled to expire in 2020, potentially evening the playing field for South Korean companies. South Korea's Hyundai last year switched its battery supplier for EVs sold in China to a Chinese company from LG Chem to ensure that its cars qualify for subsidies.

About 1mn EVs were sold last year, including 579,000 in China, according to the IEA. Beijing aims for China's total alone to reach 1mn units this year.