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A leading South Korean electric vehicle battery maker says it is in crisis as its customers suffer from disappointing electric vehicle sales in Europe and the United States.
SK On, the world’s fourth-largest EV battery maker after China’s CATL and BYD and South Korean rival LG Energy Solution, has posted losses for 10 straight quarters since it was spun off from its parent company in 2021. Its net debt more than quintupled, from 2.9 trillion won ($2.1 billion) to 15.6 trillion won over the same period, as Western EV sales fell far short of its expectations.
As losses mounted, CEO Lee Suk-hee announced a series of cost-cutting and business-practice measures on Monday, calling it an “emergency management” situation.
“We are in a critical situation and we all need to pull together,” he wrote to staff.
More radical solutions are being discussed within South Korea’s SK Group. According to a person familiar with the group’s thinking, one option under consideration is to merge SK ON’s parent company, SK Innovation, with SK E&S, the group’s highly profitable energy subsidiary that specializes in producing liquefied natural gas. The potential merger is set to be discussed at board level this month.
SK On has made a series of aggressive investments in the U.S. and Europe in recent years, betting on a widely expected surge in demand for electric vehicles. However, it has since announced layoffs at its Georgia plant and delayed the launch of a second plant in Kentucky, a joint venture with its major U.S. customer Ford.
China’s CATL and BYD dominate the global battery industry with a combined market share of 53.2%, according to South Korea-based consultancy SNE Research. Their production and sales remain concentrated in the domestic market, where EV adoption has been much greater than in Western countries.
With Washington and Brussels seeking to block the flow of imported batteries from China, South Korean battery makers such as LG, SK and Samsung SDI – along with Japan’s Panasonic – have an opportunity to capitalize on future growth in Western markets.
In the United States, non-Chinese battery makers, including SK On, have benefited from billions of dollars in subsidies under President Joe Biden’s Inflation Reduction Act.
But Tim Bush, a Seoul-based battery analyst at UBS, said South Korean battery makers have been “badly disappointed” by U.S. automakers, which he said have failed to produce electric vehicles attractive enough to mass-market consumers to meet their bullish sales expectations.
He noted that until last year, General Motors had expected to sell 1 million electric vehicles in 2025. But it sold only 21,930 vehicles in the second quarter of this year.
“Korean battery manufacturers were not investing blindly – everything they invested was based on order books with fixed volumes and prices,” said Bosch. “But carmakers did not invest enough in producing high-quality, affordable electric vehicles.”
Analysts said the South Korean telecoms giant was in a worse position than its South Korean rivals LG and Samsung SDI, both of which have also cut back on investment, because, as a latecomer to the global battery race, it offered its customers generous pricing terms that are now coming back to haunt it.
But Bush claimed that while adoption of electric vehicles has proven slower than expected, the shift to electric vehicles remains “inevitable.”
“As long as the broader SK Group continues to see SK On as a premium asset and gives it the support it needs to weather the current storm, its long-term future is likely to be secure,” he said.
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