Korea's SK On scraps $3.2 bn Turkey EV battery factory plan

SK On Co., the world’s No. 5 electric vehicle battery maker, dropped a plan to build a 4 trillion won ($3.2 billion) plant in Turkey as higher interest rates deteriorated funding conditions and the ongoing war in Ukraine hurt the European EV market, the world's second largest. 

The South Korean battery maker recently withdrew a preliminary agreement with US automaker Ford Motor Co. and Turkey's investment holding company Koç Holding AS, according to industry sources in Seoul on Sunday.

Those three companies signed an MOU in March 2022 to set up a joint venture, SK On’s second overseas partnership, to invest up to 4 trillion won in a battery factory that was slated to generate 30 to 45 gigawatt-hours (GWh) per year starting in 2025 to meet Europe's growing EV demand.

SK On has been in talks with the partners with the aim of unveiling details of the plant in the second half of last year. But the plan hit a snag as a surge in global interest rates hurt funding conditions.

FUNDING ISSUES, WAR IN UKRAINE

In December, the company raised 2.8 trillion won, including 2 trillion won from its parent SK Innovation Co., through a rights offering. SK On had aimed to secure as much as 4 trillion won early in 2022 from global private equity firms, but reduced the fundraising target as some of the major PE firms decided not to participate because of rising interest rates.

The soaring cost of electricity amid the ongoing war in Ukraine ramped up the cost of driving EVs in Europe, in some cases making them costlier to run than gas-powered cars. That dampened EV demand in Europe.

SK On may have made such a decision as its Hungary plant, a barometer for the investment plan in Türkiye, has not quickly improved its rate of defects among manufactured products, industry sources in Seoul said.

“It is most important for EV makers to procure as many batteries as they want in time,” said one of the sources.

SK On aims to focus more on the US, the world’s third-largest EV market, where demand is expected to grow in line with the country’s measures to bolster the domestic industry for the eco-friendly vehicles. The company last month broke ground on two battery plants for BlueOval SK, a 50:50 joint venture with Ford, in Glendale, Kentucky.

Write to Han-Shin Park at phs@hankyung.com
Jongwoo Cheon edited this article.