SK Innovation Will Spin off Battery Unit to Capitalise on Surging EV Demand

South Korea’s SK Innovation is girding itself to capitalise on growing demand for electric vehicle (EV) propulsion systems by spinning off its battery business.

Shareholders of the Seoul-based multinational agreed 4-1 to create SK Battery Co, enabling it to raise funds separately from its parent. The supplier of batteries to car makers including Ford and Hyundai may even consider going public.

“It’s crucial to secure timely financial resources for further quantitative and qualitative expansions in the future,” SK Innovation CEO Kim Jun told shareholders. “With the split-off of the battery business, we plan to evaluate various ways to secure resources, such as establishing joint ventures, partnerships and attracting strategic and financial investors.”

Battery makers are in demand as carmakers switch from petrol and diesel engines to electric as governments curb the use of fossil fuels to meet carbon-reduction targets. Lithium-ion (Li-Ion) battery production for cars was 160 gigawatt-hours (GWh) in 2020, up 33% from 2019, while the number of EVs reached 10 million, according to International Energy Agency data. Prices tumbled 13% in the same period.

Wholly Owned Subsidiary

The unit, to be launched on October 1, will initially be a wholly owned subsidiary of SK Innovation. More than 80% of SK Innovation shareholders voted in favour of the plan, the company said.

Kim played down speculation the battery unit could go public as early as next year. He said the business, which is aiming to turn profitable in 2022, expects its financial performance to improve as its US factories start operations.

In July, Kim said he would review whether to list only on Nasdaq or opt for a dual listing in the United States and South Korea.

The South Korean battery maker said it had more than 1 terawatt hours (TWh) worth of batteries, which could power about 14 million electric vehicles.

South Korea’s National Pension Service, SK Innovation’s No.2 shareholder with an 8.05% stake, on Tuesday voted against the split-off plan, citing concerns about damage to shareholder value.

Shares of SK Innovation were trading down 3.6% versus a 0.7% fall in the benchmark KOSPI as of 0251 GMT.