Mercedes-Benz EV Fire in South Korea Raises Alarm, While China Achieves New Energy Storage Milestone

In August, a Mercedes-Benz electric vehicle (EV) fire incident significantly impacted South Korea, focusing attention on its battery supplier, China-based Farasis Energy (688567.SH). At the same time, China's new energy storage capacities surpassed 100 GWh for the first time, marking a major milestone in domestic technological advancement.

The fire, which occurred on August 1 in Incheon, west of Seoul, saw a Mercedes-Benz EV igniting in an apartment underground parking lot. The blaze lasted eight hours, causing 23 hospitalizations due to smoke inhalation and damage to 140 vehicles. Power and water outages forced some residents to take refuge in shelters.

According to the South Korean Ministry of Land, Infrastructure, and Transport, Mercedes-Benz Korea reported that the vehicle's battery was supplied by Farasis Energy. However, both Farasis and Mercedes-Benz have yet to confirm this officially.

The incident heightened concerns about the safety of electric vehicles in South Korea. Some apartment buildings have since barred EVs from underground parking spaces. The South Korean government urged automakers to voluntarily disclose the battery suppliers for their electric vehicles. In compliance, companies like Mercedes-Benz, BMW, Hyundai, and Kia made their supplier lists public.

Mercedes-Benz disclosed that other than Farasis, it also sources batteries from CATL (China), LG Energy Solution, and SK On (both from South Korea). Notably, five out of 16 Mercedes-Benz EV models sold in Korea exclusively use batteries from Farasis.

Farasis Energy and Mercedes-Benz have been closely linked since 2018 when they entered into a significant battery supply agreement. Mercedes-Benz later became a strategic investor in Farasis, which remains its eighth-largest shareholder. Nearly 45% of Farasis's revenue in 2023, amounting to approximately 7.4 billion yuan, came from Mercedes-Benz.

Despite being ranked as the tenth-largest global battery supplier in 2022, Farasis has seen its market position decline, with the fire incident possibly exacerbating this trend. Mercedes-Benz has pledged full cooperation with fire authorities to determine the incident's cause, although the investigation is still ongoing.

Simultaneously, China's new energy storage capacities have reached an impressive milestone. As of June 2023, cumulative new energy storage installations in China stood at 48.18 GW/107.86 GWh, reflecting year-on-year growth of 129% in power capacity and 142% in energy capacity. These advances push new energy storage to constitute 46.6% of China's energy storage projects, up from 39.9% at the end of 2022.

The rapid expansion of new energy storage in China reflects the country's aggressive push towards sustainable energy solutions. According to the Zhongguancun Energy Storage Industry Technology Alliance, new projects are expected to continue growing robustly in the second half of the year. Conservative estimates place the cumulative installed capacity for new energy storage at 64.62 GW by 2024, with an ideal scenario projecting up to 75.71 GW.

The swift growth comes despite significant pricing pressures. The average bid price for energy storage systems fell by 49% year-on-year in the first half of 2023, reaching 676.06 RMB/kWh. While the market is stabilizing, the Alliance emphasized the need for reducing low-cost competition to sustain industry profitability.

As China continues to advance its new energy storage capabilities, the broader market remains vigilant about safety and efficiency, spurred by incidents like the South Korean Mercedes-Benz EV fire.