SK On to supply 100 GWh of EV batteries to Nissan

SK On Co. has landed a deal to supply nearly 100 gigawatt hours (GWh) of electric vehicle batteries to Japanese carmaker Nissan Motor Co., which could be a breakthrough for the loss-making South Korean battery maker amid a prolonged EV slump.

On Wednesday, the Korean company, also the world’s fifth-largest battery maker, announced that it will supply Nissan with 99.4 GWh of high-performance, high-nickel batteries from 2028 to 2033.

Considering that the battery cells were recently sold at $104 per kilowatt hour (kWh), the total order value is estimated at 15 trillion won ($10.3 billion).

The batteries, enough to power 1 million midsize EVs, are expected to be manufactured in SK On’s new plant in the US state of Kentucky, which is set to embark on mass production in the first half of this year.   

The deal comes as blessed rain following a drought to the money-losing Korean battery maker amid the protracted global EV chasm, or EV’s stalled transition to a mainstream auto segment.

SK On has put off the construction and operation of its new US battery plants to fight the EV downturn. Even the average utilization rate at its existing battery plants in the US and Korea dipped below 50% in 2024.

Reflecting the severe industry slowdown, Korea’s No. 2 battery maker after LG Energy Solution Ltd. swung to an operating loss last year.

In early February, its parent SK Innovation Co., Korea’s largest energy company, announced its battery business, unlisted SK On, logged 1.13 trillion won in operating loss in 2024 despite sales of 6.27 trillion won.

JACKPOT AFTER A LONG WAIT

The latest jackpot comes after years of negotiations between the Korean battery maker and the Japanese carmaker.

In March last year, the two companies signed a memorandum of understanding for an EV battery partnership on the condition that SK On would supply batteries to Nissan between 2026 and 2027.

But their collaboration was delayed due to the EV slump. Meanwhile, Nissan began merger talks late last year with its cross-town rival Honda Motor Co. in a move to stay competitive against their rivals amid the migration to EVs.

The two Japanese auto giants’ $60 billion merger negotiations, however, collapsed last month.

To beat the doldrums, Nissan, the producer of the world’s first mass-market EV, the Leaf, has shifted its focus toward EVs.

Last year, the Japanese automaker announced plans to launch 30 new models over the next three years, including 16 electrified vehicles.

Under the plan, it will produce 40% of its entire models as electrified vehicles until 2026 and then lift the EV share to 60% until 2030.

The new model lineup includes all-new EV versions of its two sports utility vehicle models and two sedan models from its Canton, Mississippi assembly plant starting in 2028.

An SK On official hinted that the Korean company’s high energy density, high-nickel batteries, which cost more than other batteries, will be fitted in Nissan’s new midsize SUV, which is expected to be the Ariya NISMO.

ENOUGH TO MITIGATE THE EV SLUMP?

The latest battery deal with Nissan is SK On’s first order from a Japanese carmaker.

It is expected to not only expand its US customer base after supplying batteries to Hyundai Motor Co. and Ford Motor Co. but also bump up its plant utilization rate in the US.

SK On currently operates two battery plants in the US, including one in Georgia with an annual production capacity of 22 GWh, and is building four additional plants with partners in Georgia, Kentucky and Tennessee.

Once fully operational, the Korean battery major's annual US production capacity is expected to exceed 180 GWh.

"This agreement underscores the strength of our battery technology and our growing presence in the North American market," said SK On president and Chief Executive Lee Seok-hee.

"Leveraging our production footprint and expertise, we are committed to supporting Nissan's electrification strategy and the broader transition to sustainable mobility."

However, risks remain because, like Ford, Nissan could hit bumps in its EV business in the US, warned market analysts.

The Japanese carmaker is suspected to have logged an operating loss of about 790 billion won for 2024 due to its poor performance in the US auto market, which accounts for nearly half of its annual sales.

Write to Woo-Sub Kim and Sang Hoon Sung at duter@hankyung.com

Sookyung Seo edited this article.