By: Vivek Kumar

TOKYO — Nissan Motor‘s plans to withdraw from manufacturing batteries for electric and hybrid vehicles may upend the industrial landscape and hand the advantage to competitors outside Japan.

Nissan is looking to sell its 51% stake in Automotive Energy Supply, the manufacturing joint venture owned by the automaker and Japan’s NEC. Nissan determined it will save money by switching to external suppliers, sources say. At 12%, Automotive Energy holds the second-highest global share in lithium-ion auto batteries, behind Panasonic.

Nissan leads the venture, so NEC is also leaning toward selling its 49% stake. NEC makes lithium-ion battery electrodes within the group separately from Automotive Energy.

Chinese and South Korean makers of lithium-ion car batteries are fiercely pursuing their Japanese counterparts. As these operations grow in scale, manufacturing costs go down. Nissan’s exit may reshape the industry.

Though Panasonic supplies batteries to Tesla Motors, the U.S. maker of electric vehicles, the Japanese company’s share has eroded amid encroachment by Chinese companies. Panasonic’s 47% share held in 2014 apparently dwindled to 34% in 2015, data from Tokyo-based Techno Systems Research shows. Meanwhile, manufacturers apart from the five biggest companies boosted their aggregate share from 14% to 33%. Chinese automakers such as BYD account for a large part of that category.

China is encouraging the spread of electric and plug-in hybrid vehicles as a way to combat the air pollution crisis. The government recommends the installation of batteries in buses and offers subsidies for green-vehicle purchases. Those policies support the expansion of Chinese battery manufacturers, which would get a shot in the arm if they take possession of Automotive Energy.

South Korean companies also are desperate to catch up. LG Chem, which supplies batteries to American automaker General Motors and other customers, built a Chinese plant in 2015. Samsung SDI completed a factory in China last year. The firm counts Germany’s BMW among its clients. Aiming to do business with Chinese auto manufacturers, Samsung SDI bought a stake in BYD last month.

Panasonic estimates that the car battery market will grow to 2.9 trillion yen ($28.4 billion) in 2025, or about six times the current scale. For that business, Panasonic targets to make 400 billion yen in sales in fiscal 2018, up 120% from fiscal 2015. Murata Manufacturing, which recently agreed to acquire Sony‘s lithium-ion battery business, is looking at joining the car battery fray.

Source: Nikkei