SK Innovation has delayed building an electric vehicle battery factory in China because of regulatory uncertainty there, two company officials told the Reuters news agency.

The Reuters report said the decision followed Chinese government proposals to toughen regulations on battery makers that could potentially deal a fresh blow to South Korean firms such as SK Innovation.

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China’s Ministry of Industry and Information Technology last week issued draft certification rules raising the minimum annual production capacity to eight gigawatt hours for lithium ion battery producers from 200 megawatt hours currently.

Battery makers must prove they meet the standards to be listed in the catalogue of approved producers, a requirement for receiving subsidies, Reuters noted.

Market research firm SNE Research said South Korean battery makers Samsung SDI and LG Chem would not be able to meet the capacity targets, adding only China’s BYD and Amperex Technology would meet the requirement as of the end of this year.

The rules, if finalised, could be the latest setback to Samsung SDI and LG Chem, which have failed to be listed in China’s battery catalogue, sparking fears that they may not be eligible for state subsidies, Reuters added.

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Samsung SDI and LG Chem have been building EV battery factories in China, as the Beijing administration has rapidly built the world’s largest EV market, paying out billions of dollars in green car subsidies to cut smog.

Reuters noted SK Innovation also said in April it would start building an EV battery factory this year with Beijing Automotive Group and Beijing Electronics.

“Given this current situation, it does not make sense to build the factory now,” one of the SK officials told Reuters. The official said SK and its partners would reconsider the timing for factory construction.

“We are closely watching the regulations,” a spokesman at LG Chem said, while a Samsung SDI spokesman declined to comment to Reuters.

Also last week, South Korea’s trade ministry expressed concerns about the potential China regulations, adding it would take “all possible measures” to resolve the problems.

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