The awkward timing of Hyundai's EV recall

Just as Hyundai pulled back the curtains on its ambitious new electric vehicle initiative last week, it got a stinging reminder of the perils ahead in electrification. The South Korean automaker said it will have to recall 82,000 EVs because of a potential for battery fires — a recall that will cost $900 million.

News of the recall came one day after Hyundai's global reveal of its new Ioniq 5 EV, a potentially high-volume model that will kick off the company's all-electric Ioniq subbrand this year.

The recall does not pertain to the Ioniq 5 but focuses largely on Kona EVs built between 2018 and 2020 that were sold mostly in Hyundai's Korean home market. It will be necessary to replace the battery systems.

There have been 15 cases of fires involving the Kona EV — 11 in South Korea, two in Canada and one each in Finland and Austria.

But the recall also shines a light on a changing auto industry reality: When it comes to EVs in the future, automakers will be more reliant than ever on the performance of a single component supplier — the battery module maker.

Hyundai did not comment on the cause of the fires. But South Korea's transport ministry said in a statement that some defects had been found in some battery cells produced at a factory in China owned by Hyundai's supplier, LG Energy Solution, a division of LG Chem.

LG Energy was quick to deflect criticism. The supplier said in a statement that Hyundai misapplied LG's suggestions for fast-charging logic in the battery management system, adding that the battery cell should not be seen as the direct cause of the fire risks.

Hyundai declined to comment on LG Energy's statement.

Unclear in the situation as it developed last week was how the cost of the recall will be handled or to what extent — if any — the battery supplier will be financially responsible.

Hyundai would not provide details on the costs, saying only that it will first wait for the results of the transport ministry's probe.

"How Hyundai handles this will set a precedent not just in South Korea but also for other countries," said Lee Hang-koo, senior researcher at the Korea Institute for Industrial Economics & Trade. "It's very significant for both Hyundai and LG, as we are in the early stages of the electric vehicle era."

Reuters contributed to this report.