SK Shows Commitment to Battery Investment Despite COVID-19 Deficit

Announcement of Battery Factory Investment Despite Large Deficits in Refining Business
Aiming to Be a Global Top 3 Battery Maker Within 5 Years

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] Despite recording a large-scale deficit, SK Innovation has expressed its determination to expand its electric vehicle (EV) battery business. This is interpreted as a plan to significantly increase its battery market share this year, which is expected to be the inaugural year of the EV market, centered on the United States and Europe.

SK Innovation announced that it will expand its EV battery production capacity targets to 85GWh in 2023 and 125GWh in 2025. This is a 25% increase from the previously set target of 100GWh in 2025.

As part of this, the company decided to invest approximately KRW 1.2674 trillion in its Hungarian subsidiary (SK Battery Hungary Kft) to establish a third plant. Kim Jun, SK Innovation’s CEO, explained the background of the investment in the Hungarian third plant, stating, "We decided to invest for the company's future despite the crisis."

The third plant will have an annual production capacity of 30GWh, which is larger than the combined capacity of the first and second plants. SK Innovation completed its first battery plant in Komarom, Hungary, with an annual capacity of 7.5GWh at the end of 2019, and the second plant, with a capacity of 9.8GWh, is scheduled to begin mass production from the first quarter of 2022.

SK Innovation is aggressively investing not only in Europe but also in the United States. The first plant in Georgia, USA, with an annual capacity of 9.8GWh, is expected to be completed by the end of this year, and the second plant, which involved an investment of about KRW 1.8 trillion last year, is being constructed with a capacity of 11.7GWh.

SK Innovation’s battery investment is interpreted as the will of Chairman Chey Tae-won. SK Innovation recorded a massive deficit of KRW 2.5688 trillion last year due to a sharp decline in demand for petroleum products amid the COVID-19 pandemic, resulting in significant losses in its refining business. In this situation, the business community widely agrees that the CEO alone could not have decided on trillion-won scale new business investments.

The reason SK Group is focusing on the battery business is based on the judgment that the speed of EV popularization will expand faster than expected. After Joe Biden was elected President of the United States, he announced eco-friendly policies, including plans to replace all 3 million government fleet vehicles with American-made EVs. Additionally, there is a clear intention to support the EV industry through the revival of EV subsidies and the installation of 500,000 EV charging stations.

Moreover, with the enforcement of the USMCA, which provides tariff benefits for auto parts produced in the United States, the demand for batteries from LG Chem and SK Innovation, which have production bases in the U.S., is expected to increase significantly.

A battery industry official said, "Among the three domestic battery companies, LG Chem and SK Innovation are actively investing," adding, "SK Innovation is continuing trillion-won scale investments in China, Europe, and the U.S., the major global EV markets, aiming to be among the global top three battery makers within five years."

This content was produced with the assistance of AI translation services.