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Japan to jolt EV battery plant construction with $880m subsidies

  • November 17, 2021
  • , Nikkei Asia , 11:59 a.m.
  • English Press

MAYUMI HIROSAWA, Nikkei staff writer

 

TOKYO — Japan will spend about 100 billion yen ($877 million) on subsidies to support the construction of factories for advanced batteries that power electric vehicles.

 

The financial assistance, which will also cover the renewable energy sector, will be approved for each plant, and companies can apply jointly for the funds. Makers of batteries, related materials and recycling companies will be eligible under the program.

 

The government and the ruling Liberal Democratic Party are finalizing the exact sum to be included in this fiscal year’s supplementary budget.

 

Electric cars are expected to play a crucial role in Japan’s decarbonization efforts. By encouraging investment by related businesses, Tokyo hopes to establish a stable supply chain. 

 

Last month, the cabinet approved a strategic energy plan with the goal of electrifying all new passenger vehicles by 2035. The government will encourage major investments that open the door to manufacturing 100 GWh of storage batteries domestically by 2030, enough to power 2.4 million EVs.  

 

The new subsidies are a concrete element of that initiative.

 

“Storage batteries hold the key to green and digital, and we are weighing measures to encourage large manufacturing sites to be included in the economic package,” Koichi Hagiuda, minister of economy, trade and industry, said Monday during a meeting with advisers.

 

Because EVs and plug-in hybrids require high-capacity batteries, initial investments in advanced battery facilities can cost upward of 100 billion yen.

 

China’s Contemporary Amperex Technology Co. Ltd., or CATL, held the top share of 24% in the global EV battery market in 2020, according to South Korean analytics firm SNE Research. South Korea’s LG Energy Solution came in second at 23.5%.

 

Panasonic ranked third at 18.5%, but the Japanese company’s market share had shrunk by 5.9 points from 2019.

 

The LDP and the government worry that if Chinese and European competitors sweep the battery market, Japan’s automotive industry risks losing its competitive edge.

 

The battery market is expected to grow with the global shift toward decarbonization. Goldman Sachs projects that supplies of batteries will reach 1,700 gigawatt-hours in 2025, up from 421 GWh in 2020. Roughly 750 GWh will come from China in 2025, while Europe supplies about 730 GWh. Supplies from some other regions including Japan will hover around 30 GWh.

 

The global fight for hegemony in batteries is intensifying. Europe plans to provide the rough equivalent of 800 billion yen in support of factories and similar priorities. The U.S. also announced a plan to encourage investment. 

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