January 9, 2020 / 10:02 PM / 9 days ago

SK Innovation plans battery plant expansions in U.S., Hungary

LAS VEGAS, Jan 9 (Reuters) - South Korea’s SK Innovation plans to build a second electric vehicle battery factory in the United States and is considering an expansion of an electric vehicle battery plant in Hungary, the company’s chief executive told Reuters.

Kim Jun, CEO of SK Innovation Co Ltd, said he expects more Asian battery makers to produce batteries in the United States instead of importing them from their home countries to avoid tariffs and to meet demand locally from automakers for the key EV component.

In Hungary, SK Innovation is considering expanding its second factory, currently under construction, to boost supplies to Volkswagen AG. The initial production capacity was planned at 10 GWh but could be boosted to 16 GWh.

Kim said SK Innovation was in talks with Volkswagen to turn that factory into a joint venture.

Volkswagen would only say that it is in talks with various partners to discuss further options. It said its battery demand is increasing to over 300 GWh a year in Europe and Asia alone.

SK Innovation owns South Korea’s biggest oil refiner and has ventured into EV battery making in recent years. Kim discussed the new global expansion plan on the sidelines of the global tech show CES, which has become a key venue for automakers.

The expansion would help the company cope with a boost in new orders last year. As of end-2019, accumulated contract orders stood at 500 GWh from 320 GWh the previous year. But the additional investment means the battery division could break-even in 2022, a year later than expected, said Kim.

SK Innovation is already building its first 9.8 GWh factory in Georgia to serve Volkswagen’s U.S. EV manufacturing base in Chattanooga, Tennessee. That factory is still on track to start producing batteries from early 2022.

SK Innovation’s second plant in Georgia could be 10 GWh, but Kim declined to say which automaker it would be supplying.

In China, the company’s first 7.5 GWh factory in Changzhou went online in late 2019, and another 20 GWh factory in Yancheng will be finished by the end of the year. SK Innovations is considering investing in Chinese battery maker EVE Energy Co to turn the company into a joint venture, bringing in another 8.5 GWh of production capacity.

The new orders and plans for expansion come as SK Innovation faces market concerns about a legal feud with competitor LG Chem Ltd in the United States. A risk for SK Innovation is that LG could succeed in blocking imports of its EV batteries.

SK Innovation said it is considering all means, including a settlement with LG Chem, to resolve the legal dispute and said it will honor its contracts with its automotive customers.

“We made a promise to our customers, and we will keep those promises,” said Kim.

Kim expects pure EVs to make up more than 10% of total global car sales in 2025, when SK Innovation’s global production capacity would be about 100 GWh. (Reporting By Jane Lanhee Lee, Additional reporting by Heekyong Yang in Seoul and Edward Taylor in Frankfurt; Editing by Cynthia Osterman and Joseph White)

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