SK Innovation to expand in Hungary and the USA

South Korean battery cell manufacturer SK Innovation apparently wants to further increase its production capacities in the USA and Hungary to meet rocketing demand for EV batteries. There is also talk of a joint venture with Volkswagen.

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As Reuters reports citing CEO Kim Jun, the company is planning a second factory in the US state of Georgia with an annual capacity of 10 GWh. SK Innovation’s first US cell factory in Georgia, the construction of which began in March 2019, will supply cells with a capacity of 10 GWh to Volkswagen’s Chattanooga plant in neighbouring Tennessee at the end of the first phase. Production is scheduled to begin in early 2022. SK Innovation CEO Kim Jun declined to indicate which companies might be the recipients of batteries from the possible second plant.

Whether the company will finally decide on the investments ultimately depends on the demand from the car industry. As another person familiar with the matter told Reuters, the investment volume is to be approved by the management board in the second half of 2020. Since the source says that investments of 100 million dollars per gigawatt-hour of production capacity are expected, this means that around one billion dollars would have to be approved for the second US factory. According to CEO Kim Jun, further investments could mean that the battery division would only reach the break-even point in 2022 instead of one year earlier as planned.

Besides, SK Innovation is considering increasing the capacity of its second factory in Hungary, which also began construction in March 2019, to 16 GWh annually to be able to supply more cells to Volkswagen. Currently, a capacity of 10 GWh is also planned. As Reuters reports, SK Innovation is presently in talks with Volkswagen to consider making the plant a joint venture. VW did not confirm this directly to Reuters but stated that they were discussing options with various partners. An SK Innovation spokeswoman told Reuters that another option being considered is to build the additional 6 GWh capacity in a European country other than Hungary.

SK Innovation only just opened its first battery cell factory outside South Korea in Changzhou, China, in December. Soon the first US plant and the factory in Hungary will follow. Another factory in China is scheduled to open at the end of 2020. According to Kim, the company is also considering investing in EVE Energy in China to secure an additional 8.5 GWh of production capacity.

According to Reuters, the expansion plans in China and also Hungary are due to uncertainties from the USA. The two mega giants of South Korean battery production, SK Innovation and LG Chem are currently caught in a bitter industrial dispute. If SK Innovation is defeated, LG Chem could, under certain circumstances, at least prohibit the import of SK Innovation cells into the USA, but not their production.

Update 28 April 2020: The plan to build a second plant in the USA is now more concrete. According to Reuters, the construction of the new US plant is to start in July this year. For this purpose, SK Innovation is investing 727 million dollars. The plant is supposed to offer an annual production capacity of 11.7 GWh with the start of production planned for 2023.

reuters.com, reuters.com (update)