South Korean EV Battery Maker SKOn in Crisis Amid Sluggish Western Sales

TapTechNews July 7th news, according to the Financial Times report, South Korean electric vehicle battery manufacturer SKOn is announcing that the company is in crisis due to the sluggish electric vehicle sales of its customers in the European and American markets.

As the world's fourth largest electric vehicle battery manufacturer (after Chinese giants CATL and BYD, and South Korean competitor LG Energy Solution), SKOn has suffered losses for 10 consecutive quarters since splitting from its parent company and going public in 2021. Due to the fact that the sales of Western electric vehicles are much lower than expected, the company's net debt has increased by more than five times during the same period, from 2.9 trillion Korean won to 15.6 trillion Korean won (TapTechNews note: currently about 82.259 billion RMB).

With losses snowballing, SKOn's CEO Lee Seok-hee announced a series of cost-cutting and work-style reform measures last week, and described it as 'emergency state management'. Lee Seok-hee said in a letter to employees: 'We have reached a critical juncture where we should all unite.'

There are also more radical solutions being discussed within the South Korean SK Group. According to people close to the group, one option being considered is to merge the parent company of SKOn, SK Innovation, with the SK Group's profitable energy affiliate SKE&S, which focuses on liquefied natural gas production. The potential merger will be discussed at the board level this month.

In recent years, SKOn has made a series of aggressive investments in the United States and Europe in anticipation of a general expected surge in electric vehicle demand. However, the company then announced an extension of the workers' suspension time at the factory in Georgia, USA, and postponed the start of the second plant in Kentucky in cooperation with its major American customer Ford Motor.

According to data from the Korean consulting firm SNE Research, Chinese manufacturers CATL and BYD occupy the dominant position in the global battery industry, with a combined market share of 53.2%. The production and sales of the two companies are still concentrated in the domestic market, and the penetration rate of electric vehicles in China is much higher than that in Western countries.

In the US, non-Chinese battery manufacturers including SKOn have received billions of dollars in subsidies from President Biden's 'Inflation Reduction Act'. But Tim Bush, a battery analyst at UBS in Seoul, said that South Korean battery manufacturers are'very disappointed' with American automakers, who have failed to produce enough electric vehicles to attract mass market consumers to achieve their own bullish sales predictions. He noted that until last year, General Motors had predicted to sell 1 million electric vehicles by 2025. But in the second quarter of this year, they only sold 21,930.

'South Korean battery manufacturers didn't invest blindly - all the investments they made were based on orders with fixed output and prices,' Bush said. 'But automakers didn't invest enough to produce high-quality and affordable electric vehicles.'

Analysts said that SKOn's situation is worse than that of South Korean competitors LG and Samsung SDI, both of which have also cut investments. As a latecomer in the global battery race, SKOn provided generous pricing terms for its customers, and now these terms are haunting it instead.

However, Bush believes that although the popularity rate of electric vehicles is lower than expected, the transform ation to electric vehicles is still 'inevitable'. He said: 'As long as the entire SK Group continues to see SKOn as an important asset and provides the support needed for it to tide over the current difficulties, then the long-term future of SKOn may be guaranteed.'