Investment "hot spot" for Chinese battery companies

According to the China Securities Times (STCN), Sunwoda, a Chinese battery manufacturer, plans to establish a company in Vietnam through its subsidiary in Hong Kong and invest in building a consumer lithium battery factory in Vietnam. The total investment capital is expected to be around 2 billion CNY.

The factory is expected to produce consumer batteries, a core activity of Sunwoda. Consumer batteries manufactured by Sunwanda have joined the supply chain of terminal brands such as Apple, Huawei, Samsung, OPPO, Vivo, Xiaomi, and Honor. In 2023, consumer batteries accounted for nearly 60% of Sunwoda's total revenue.

The latest move from Sunwoda follows plans of other prominent names, including BYD, Chery, Great Wall Motors, Guoxuan Hi-Tech, CATL, Huineng Technology, etc., to expand operations in Southeast Asia in general and Vietnam in particular.

Explaining the choice to build a factory in Vietnam, Sunwanda said: “As an emerging market economy, Vietnam has undertaken significant activities in transferring manufacturing capacity for consumer electronics in recent years, and the support facilities for related industrial chains have also been continuously improved, which better meets the company's needs for building overseas production facilities.”

In addition, the unique wind and hydropower resources make Vietnam a top choice for Chinese photovoltaic companies when expanding abroad. Many Chinese photovoltaic companies, including JA Solar, LONGi Green Energy, JinkoSolar, and Trina Solar, have established factories in Vietnam through direct investment or acquisition.

VinFast "lights the fire"?

For Chinese electric battery companies entering Vietnam, one of the direct driving factors is their partnership with VinFast, an electric vehicle company owned by VinGroup and often dubbed the "Tesla of Vietnam."

Specifically, VinFast has become an ideal partner for many Chinese battery manufacturers, including CATL, Guoxuan Hi-Tech, and Huineng Technology, all of which have reached cooperation agreements with VinFast.

For example, in February 2021, Huineng Technology signed a memorandum of understanding with VinFast and planned to establish a joint venture. In July 2022, VinFast announced an investment of tens of millions of USD in Huineng Technology. The company plans to supply solid-state batteries to VinFast starting from 2024 and is considering a joint venture to build a solid-state battery factory in Vietnam.

Meanwhile, Guoxuan Hi-Tech's factory in Vietnam is progressing faster. Collaborating with VinFast on lithium iron phosphate batteries, the two parties signed a memorandum of understanding in August 2021. The battery production factory started construction in November 2022 and is expected to go into large-scale production in Q3/2024. This is also the first lithium iron phosphate battery factory in Vietnam.

The collaboration method between CATL and VinFast is through technology licensing. In October 2022, the two companies signed a memorandum of understanding to cooperate on projects such as CTP (cell-to-pack) and CIIC (CATL integrated intelligent chassis) skateboard chassis.

Apart from VinFast, other Chinese electric battery companies are also entering the Vietnamese market to support the market penetration of electric vehicle manufacturers such as BYD, Chery, Great Wall Motors, etc.

To date, these companies have announced plans to build factories in Vietnam, and many Chinese automakers are actively entering the Vietnamese electric vehicle market. Among them, SAIC-GM-Wuling cooperates with Vietnam's TMT Motors to manufacture and assemble Wuling mini electric vehicles in Vietnam.

VinFast is considered one of the factors promoting Chinese EV manufacturers' investments in Vietnam.

Strong government support

The presence of Chinese battery manufacturers in Vietnam is just a typical example of how these companies have been actively expanding globally in recent years.

However, according to STCN, Southeast Asian countries, including Vietnam, have fully supported in terms of policy for Chinese companies to establish factories there.

Taking Vietnam as an example, with the goal of net-zero by 2050 and using green energy for all means of transport, the government has included manufacturing, assembly of electric vehicles, manufacturing of battery, etc., in the special investment incentives list, with many measures such as tax reductions and exemptions as well as fee support for electric vehicle purchases.

In terms of sales, the electric vehicle market share in Vietnam is still relatively low, but the prospects are very promising. According to forecasts from BMI Research, part of Fitch Solutions, sales of electric passenger cars in Vietnam will grow at an average rate of 25.8% per year over the 10-year period from 2023 to 2032, reaching about 65,000 units in 2032.

BMI assessed: “During the forecast period from 2023-2032, electric vehicle manufacturing activities in Vietnam by brands such as VinFast, Wuling Hongguang, Skoda, and Hyundai Motor will drive strong market growth.”