[Visiting Net Zero No.1] SK On's Electric Vehicle Order Backlog Reaches 27 Million Units... Expected to Surpass Breakeven Point This Year

[Komarom (Hungary) = Asia Economy Reporter Kim Hyewon] Battery companies, including SK On, basically follow the practice of securing orders first and then building or expanding factories. The ‘order first, invest later’ strategy makes the competition for market share more aggressive than in any other industry. From this perspective, the figure of SK On’s order backlog of ‘1 terawatt (1000 GWh) + α’ disclosed unusually last year should not be taken lightly. As of last year, SK On’s order backlog was known to be 1600 GWh. This corresponds to the amount for 27 million electric vehicles. Considering that SK On’s order backlog in 2017 was about 60 GWh, it has increased 26.6 times in just four years. An SK On official said, “If the value of the order backlog is converted into an amount, it reaches 220 trillion won.”

There is no disagreement that SK On is currently one of the fastest-growing battery companies. Last year’s news of establishing a joint venture (JV) with Ford in the U.S. with a scale of 129 GWh caused tension in the industry. Initially, the two companies were discussing a joint venture size of about 60 GWh, but they decided to establish the joint venture at more than twice that scale. It is also openly discussed that SK On and Ford will build a JV in Europe and decide on the joint venture scale and site within this year. Some speculate that Turkey, where Ford has a finished car factory, is a candidate.

Besides Europe, SK On has production bases overseas in China and the U.S., and domestically in Seosan, operating as a four-pronged formation. The combined annual battery production capacity of SK On’s factories in Europe, China, the U.S., and Korea is about 40 GWh. Next year, this will increase to more than double, reaching 85 GWh, and by 2025, it is expected to grow to 220 GWh, and by 2030, to 500 GWh.

In the short term, SK On faces two major tasks: breaking the break-even point (BEP) and an initial public offering (IPO). Given the battery business’s characteristic of a long investment recovery period, surpassing the BEP is a milestone that signifies a new starting line beyond achieving economies of scale. SK On aims to surpass the BEP and achieve its first profitable management this year. Looking at the operating profit margin trend, it has rapidly improved from -36% in Q1 2020 to -12% in Q3 last year. Unless there are unexpected variables, the industry consensus is that the possibility of turning a profit this year is high. Sales are also estimated to have surpassed 1 trillion won for the first time in 2020 and exceeded 3 trillion won last year. The sales target for this year is set close to 6 trillion won.

SK On has stated that it will not rush the IPO until its corporate value is properly recognized in the market, but it cannot ignore that its competitor LG Energy Solution is conducting the largest IPO in January. Instead, SK On has decided to attract equity investment before listing (pre-IPO). The pre-IPO scale is known to be about 3 trillion won.

Komarom (Hungary) = Reporter Kim Hyewon

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