SK-Volkswagen battery venture hits snag
German carmaker sets up joint venture with Swedish firm amid SK-LG feud
SK Innovation’s plan to establish a joint electric vehicle (EV) battery venture with Volkswagen has hit a snag as the German carmaker has struck a deal with a Swedish producer amid SK’s escalating legal battle with LG Chem, according to industry officials, Monday.
SK officials insist the talks for the possible joint venture are not dead yet, but according to many analysts, the plan will unlikely materialize, given SK’s growing business uncertainties associated with its lawsuits against LG. In the worst case scenario, SK may be forced to give up its battery business if courts rule it stole secrets from its Korean rival.
Volkswagen AG said it decided to create a 50/50 joint venture with Northvolt AB to build a lithium-ion battery plant next year.
The automaker said the plant will start producing batteries as early as late 2023, and the expected annual output is 16 gigawatt-hours.
The announcement came as SK Innovation’s bid to set up the joint venture has been stalling. In November, it became one of the battery suppliers for the automaker and has sought to set up a joint venture for a battery plant in Europe since then.
But the plan has been facing rumors that it has been frustrated, as the two sides showed no noticeable progress regarding it even after Northvolt, which started negotiations with Volkswagen later than SK Innovation, closed its deal.
“The talks over establishing the joint venture are ongoing,” an SK Innovation official said. “The reason it is taking a long time is that our deal, if signed, will be a more comprehensive one on building a plant with an output greater than that of Northvolt. Though Northvolt came up with a visualized deal faster than us, we do believe that the chance of establishing the joint venture remains positive.”
Though SK Innovation cited the deal’s size for the delay, industry officials said doubts on the joint venture are stemming from the legal battle between SK Innovation and LG Chem.
In April, LG Chem filed a petition with the Delaware District Court in the United States against SK Innovation. In the petition, LG Chem said: “SK Innovation’s win of Volkswagen’s U.S. market EV battery business significantly constrains LG Chem’s ability to sell EV battery products to Volkswagen in the U.S. and makes it more difficult for LG Chem to partner with Volkswagen for the supply of EV batteries.”
Both LG Chem and SK Innovation are battery suppliers to Volkswagen, but LG Chem has been unhappy about SK Innovation raising its share in handling the automaker’s demand.
“It is widely accepted that LG Chem is exercising its influence to check SK Innovation’s stronger partnership with Volkswagen,” an industry official said citing German news reports that LG Chem threatened to cut its battery supply to Volkswagen if the carmaker started production with SK Innovation.
“For a global automaker, there is no need to enhance a partnership with a battery firm that has uncertainties over supply depending on the result of a lawsuit,” the official said. After LG Chem launched its suit in April, SK Innovation countersued LG Chem in the U.S. Sept. 3, claiming the latter violated the former’s patents.
Depending on the results of the suits, either firm could face setbacks in exporting batteries to the U.S. or producing them in the country. “We also hope we can settle the lawsuits as soon as possible and wrap up the joint venture deal with Volkswagen,” the SK Innovation official said.