SK On, a Korean electric vehicle battery manufacturer, fell into crisis due to sluggish electric vehicle sales in Europe and the US. It lost money for 10 consecutive quarters, and its debt soared. The review said that South Korean battery makers are “very disappointed” with American automakers. GM also predicts that it will sell 1 million electric vehicles by 2025, but only 21,930 units will be sold in the second quarter of this year.
As sales in the European and US markets fell short of expectations, South Korean electric vehicle battery manufacturer SK On announced that the company was in crisis.
As the fourth largest electric vehicle battery manufacturer in the world after the Ningde Era, BYD, and Korea's LG Energy Solutions, SK On has been losing money for 10 consecutive quarters since it spun off from its parent company in 2021. During this period, its net debt increased more than fivefold, from 2.9 trillion won (about 2.1 billion US dollars) to 15.6 trillion won.
As losses continue to expand, SK On CEO Lee Seok-hee last week announced a series of measures to cut costs and work practices, calling it an “emergency management” state. Lee Seok-hee wrote in a letter to employees:
We are at a loss; we must work together.
More aggressive solutions are also being discussed within the SK Group in Korea. According to foreign media quoting people familiar with the matter, SK Innovation, the parent company of SK ON, is considering merging with SK E&S, a high-profit subsidiary of the group that specializes in liquefied natural gas production. This potential merger plan will be discussed at the board level this month.
SK On has invested heavily in the US and Europe in recent years, betting on a surge in demand for electric vehicles. However, production of electric vehicles in the European and American markets has always been weak, and sales have fallen short of expectations.
Tim Bush, a battery analyst at UBS (UBS) based in Seoul, said that South Korean battery makers are “very disappointed” with US automakers, believing that US automakers have failed to produce electric vehicles that are attractive enough to the mass market to meet their own sales expectations.
He pointed out that until last year, GM predicted that it would sell 1 million electric vehicles by 2025, but only 21,930 units were sold in the second quarter of this year.
Korean battery makers' investments are not blind; all of their investments are based on fixed quantity and pricing orders. But automakers are underinvesting in producing high-quality, affordable electric vehicles.
Analysts say SK is in a more difficult situation than South Korean rivals LG and Samsung SDI. As a late-stage entrant in the global battery market, SK offered customers generous pricing terms, but these terms are now a burden to them.
Despite this, Bush believes that although the spread of electric vehicles has been slower than expected, the transition to electric vehicles is still “inevitable.” He said, “As long as SK Group continues to view SK On as an important asset and gives it the support it needs to overcome its current difficulties, then its long-term prospects are still secure.”