SK Innovation eyes second U.S. EV battery plant

LAS VEGAS/SEOUL -- South Korea's SK Innovation Co. plans to build a second electric vehicle battery plant in the United States and is considering expanding another factory in Hungary to meet soaring demand for EV cells, its CEO told Reuters.

Kim Jun also said he expects more Asian manufacturers to make batteries in the United States instead of importing them to avoid tariffs and meet demand from U.S. automakers locally.

The investment comes as automakers race to adapt to increasingly stringent regulatory requirements globally aimed at reducing carbon dioxide emissions.

SK Innovation's second plant at its under-construction production site in Georgia could have capacity equivalent to 10 gigawatt-hours, Kim said, declining to identify customers.

The firm has already pledged to invest $1.7 billion to build the first, 9.8 gigawatt-hour factory to serve Volkswagen's plant in neighboring Tennessee, with production on track to begin early in 2022.

The second, 10 gigawatt-hour plant would require about $1 billion as capacity of 1 gigawatt-hour needs $100 million, a person with 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 -- currently under construction -- to 16 gigawatt-hours from 10 gigawatt-hours to boost supply to Volkswagen, Kim said, adding the firm is in talks with the automaker to turn it into a joint venture.

A spokeswoman said another option under consideration is to build the additional 6 gigawatt-hours of capacity in a European country other than Hungary.

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

SK Innovation, South Korea's biggest oil refiner, has rapidly expanded into EV batteries and Kim discussed further plans in Las Vegas on the sidelines of the CES trade show.

The plans are aimed at helping the firm cope with a surge in battery orders, at 500 gigawatt-hours by the end of 2019 from 320 gigawatt-hours a year earlier. However, Kim said, extra investment means the battery division could break even a year later than planned, in 2022.

In China, SK Innovation's first 7.5 gigawatt-hour factory in Changzhou went online in late 2019, and a 20 gigawatt-hour plant in Yancheng will be finished by year-end. The firm is also considering investing in China's EVE Energy Co. bringing in another 8.5 gigawatt-hours of capacity, Kim said.

The expansion plans come amid market concerns about a legal feud between SK Innovation and cross-town rival LG Chem in the United States, in which a win for LG Chem could stop SK Innovation importing EV batteries.

SK Innovation said it is considering all means of resolution, including settlement, and said it will honor all contracts.

"We made a promise to our customers, and we will keep those promises," said Kim.

Kim expects EVs to make up more than 10 percent of global car sales in 2025 and nearly 20 percent in 2030, when SK Innovation's capacity would be about 200 gigawatt-hours.