SK Innovation Plans to Build a EV Battery Plant in the U.S. to Meet Demand

author: Eric Walz   

As automakers make plans to electrify their model lineups, one hurdle to address is securing a steady supply of lithium ion batteries. Right now, a majority of the EV batteries supplied to the auto industry come from Asian suppliers, such as South Korean battery makers LG Chem, SK Innovation and Samsung SDI, and China's Contemporary Amperex Technology Co. Limited (CATL), and BYD.

However, as demand for EV batteries rises, Asian battery makers, including SK Innovation, are looking to build plants overseas to better serve their automotive customers. 

In Nov 2018, The Volkswagen Group, one of the world's biggest automakers, announced it selected SK Innovation as one of its battery suppliers.

Kim Jun, the chief executive of South Korea's SK Innovation Co Ltd, told Reuters that the company plans to build a second electric vehicle (EV) battery plant in the U.S. and is considering expanding another factory in Hungary to meet soaring demand for EV cells.

Kim also told Reuters he expects that more Asian manufacturers will follow SK Innovation and manufacturer EV batteries in the United States instead of importing them to avoid tariffs and meet demand from U.S. automakers locally.

In December, U.S. automaker General Motors and LG Chem announced they will both invest $2.3 billion to build a joint venture EV battery cell plant in Lordstown, Ohio, which is slated to be one of the world's largest EV battery facilities when completed.

The batteries produced at the new plant will battery cells will be used in a GM electric pickup which will start production in fall 2021 and support GM's goal of introducing around 20 new electric vehicles globally by 2023.

The investment comes as automakers worldwide plan to develop more electric models in an effort to reduce carbon dioxide emissions. China for example, plans to lead the world in electric vehicle adoption and a new crop of EV startups are emerging in China to take advantage of generous government subsidies. 

SK Innovation's second plant at its under-construction production site in the U.S. state of Georgia could have a capacity equivalent to 10 GWh, Kim said, declining to identify any automotive customers.

For comparison, Tesla Nevada gigafactory, which is currently the world's largest producer of lithium ion battery cells, is targeting an annual capacity of 35 GWh, nearly as much as the rest of the world combined, according to Tesla.

SK Innovations is investing $1.7 billion to build the first, 9.8 GWh factory to supply Volkswagen AG in the U.S. in Tennessee, with production slated to begin in 2022.

The second, 10 GWh plant would require about $1 billion as capacity of 1 GWh needs $100 million, a person familiar with the matter said. The final figure will be subject to board approval in the first half of 2020, the person told Reuters.

In Hungary, SK Innovation is considering expanding its second plant, which is currently under construction, to 16 GWh from 10 GWh to meet demand for Volkswagen. Kim said to Reuters that the firm is in talks with VW to turn the battery factory in Hungary into a joint venture.

Volkswagen told Reuters its battery demand has exceeded 300 GWh a year in Europe and Asia and that it is discussing options with various partners. 

Volkswagen plans to electrify its entire vehicle lineup by 2030 and will need plenty of lithium ion batteries for its goal. The automaker builds over 10 million vehicles each year.

Although SK Innovation is South Korea's biggest oil refiner, the company rapidly expanded into EV batteries. At this week's CES in Las Vegas, Kim discussed further plans.

SK Innovation's expansion plans are designed to address a big increase in battery orders, which topped 500 GWh at the close of 2019. A year earlier, battery orders totaled just 320 GWh.

In China, SK Innovation's first 7.5 GWh factory in Changzhou became operational in 2019, and a 20 GWh plant in Yancheng will be finished by the end of this year. The firm is also considering investing in China's EVE Energy Co Ltd, bringing in another 8.5 GWh of capacity, Reuters reports.

Kim expects EVs to make up over 10% of global car sales in 2025 and nearly 20% in 2030, when SK Innovation's capacity would be about 200 GWh.

Eric Walz

Originally hailing from New Jersey, Eric is a automotive & technology reporter covering the high-tech industry here in Silicon Valley. He has over 15 years of automotive experience and a bachelors degree in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the auto industry and beyond. He has worked at Uber on self-driving cars and as a technical writer, helping people to understand and work with technology.