Loss-making SK On Co., the world’s fifth-largest battery maker, has hit the jackpot with a $1.8 billion deal to supply electric vehicle batteries to Japanese carmaker Nissan Motor Co.'s plants in the US.
According to industry sources on Thursday, the South Korean battery major has agreed with Nissan to supply 20 gigawatt hours (GWh) of batteries, enough to power 300,000 EVs.
Considering that battery cells are sold at $89 per kilowatt hour (kWh), according to BloombergNEF, the SK On-Nissan battery deal is estimated at $1.78 billion.
The latest EV battery order is expected to come as a huge relief to the money-losing Korean battery maker amid the prolonged EV slowdown.
Its parent SK Innovation Co., Korea’s largest energy company, is due to announce last year’s fourth-quarter earnings, including unlisted SK On’s results, on Feb. 6.
But the troubled Japanese carmaker has delayed its EV release schedule in the face of the global EV market slump.
Nissan is now in negotiationsl with its cross-town rival Honda Motor Co. on merging so they can stay competitive against their rivals as the auto industry migrates to EVs.
Once they come under one roof, they could better flex their muscles as the world’s third-largest carmaker.
The two Japanese auto giants will, however, operate their EV business as separate operations until 2030, when they are expected to enjoy consolidation synergy.
SK On battery plant in the US state of Georgia (Courtesy of SK On) IDLE LINES IN SK ON’S US BATTERY PLANTS
After Nissan and Honda complete the merger, they are expected to use the same EV platform as the shared EV platform by Hyundai Motor Co. and Kia Corp.
Considering that Honda is building a battery plant in the US with Korea’s No. 1 battery maker LG Energy Solution Ltd., Nissan-SK On’s latest battery deal is expected to ensure SK On’s stable battery supply.
Korea’s No. 2 battery maker is expected to produce batteries for Nissan’s EVs in the US from idle lines at one of its US plants.
Amid the prolonged slowdown in global EV demand, its US partner Ford has also suffered from declining EV sales, leading to a low utilization rate at SK On-Ford plants in the US.
Write to Hyung-Kyu Kim and Il-Gue Kim at khk@hankyung.com Sookyung Seo edited this article.
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