SK On eyes first profit as it begins US production for Hyundai EVs

Local workers install SK On batteries into an Ioniq 5 electric vehicle at Hyundai's Deltamas Industrial Park production facility in Bekasi, Indonesia. (Hyundai Motor Group)

SK On will begin mass production of electric vehicle batteries for Hyundai Motor Co. in the US next month, a move expected to help the battery maker turn a profit for the first time after years of losses.

The company’s US unit, SK Battery America, will reportedly begin partial production at its Georgia Plant 2, supplying batteries for Hyundai’s new EV production facility, Hyundai Motor Group Metaplant America, also located in Georgia.

According to industry sources on Monday, SK On has been working to convert its production lines, initially set up to supply batteries for Ford, to meet Hyundai's requirements. The facility’s annual capacity of 11.7 gigawatt-hours will support production of more than 100,000 EVs. Models like the Hyundai Ioniq 5, which has performed strongly in the US, will be among the first to roll off the line using SK On’s batteries.

This partnership is critical for SK On, which has faced 11 consecutive quarters of losses. In the second quarter this year, the company posted a 461 billion won ($345 million) operating loss, the largest since its spinoff from SK Innovation in 2021. However, the company aims to return to profitability by the end of the year, buoyed by new US battery subsidies and increased production for Hyundai.

SK On stands to benefit from the US Advanced Manufacturing Production Credit, which provides tax credits of $35 per kilowatt-hour for battery cells and $45 per module produced domestically. In the second quarter, the company earned 111.8 billion won from these credits, with more expected as Hyundai’s local production ramps up. SK On's global battery production facilities have been underutilized, with an average utilization rate falling from 87.7 percent last year to just 53 percent in the first half of this year.

Hyundai is rapidly expanding its EV footprint in the US, where it held an 11.1 percent market share in EV sales from January to July 2023, second only to Tesla. The HMGMA plant, set to begin production in the fourth quarter, will manufacture models like the Ioniq 5 and the larger Ioniq 9 SUV.

In addition to the current Georgia plant, SK On and Hyundai are developing a new joint venture battery plant in Georgia with a planned capacity of 35 gigawatt-hours, set to be operational by late 2025.

However, broader industry challenges remain. Consulting firm J.D. Power recently cut its US EV market share forecast for 2024 from 12 percent to 9 percent, citing slower-than-expected growth due to increased competition with gasoline vehicles.

By Moon Joon-hyun(mjh@heraldcorp.com)