Battery Bandwagon
SK on, a battery-focused subsidiary of SK innovation, is planning to invest 1.5 trillion won (US$1.12 billion) by 2025 to construct its third battery factory in Seosan, South Chungcheong Province, which is a key production hub in South Korea. This marks the company’s return to domestic investments after a gap of five years.
On Aug. 16, SK on entered into an agreement with South Chungcheong Province and Seosan City for expansion. The maximum annual production capacity of the Seosan Plant 3 is set at 14 GWh. Existing Plants 1 and 2 will also undergo gradual upgrades, including equipment replacements and line enhancements, aiming to increase the annual production capacity from 5 GWh to 6 GWh by 2028. This expansion plan will result in a total domestic production capacity of 20 GWh per year for SK on, making it capable of supplying batteries for approximately 280,000 electric vehicles.
SK on, which has focused on overseas investments in countries like the United States and Hungary, has decided to expand its Seosan plant, and this move is widely seen as being closely related to Hyundai Motor’s plans to set up a new electric vehicle manufacturing plant. Hyundai Motor is planning to invest around 2 trillion won in its Ulsan plant to begin producing 200,000 electric vehicles annually starting from the end of 2025.
SK on’s substantial investment of 1.5 trillion won in the Seosan plant in South Chungcheong Province is driven by the goal of transforming the domestic facility into a “mother factory.” The company intends to use this plant as a crucial facility to accumulate expertise in order to rapidly stabilize newly established overseas plants. This strategy is interpreted as an effort to enhance the production efficiency of overseas factories, which has previously weighed down the company’s performance. To achieve this, the company plans to upgrade Seosan Plant 3 into a smart factory with the aim of reducing production time by more than 30 percent compared to the current lines.
SK on announced on Aug. 16 that it aims to quadruple the production capacity of the Seosan plant, increasing it from the current 5 GWh per year to 20 GWh by 2025. This expanded capacity of 20 GWh annually would be capable of supplying batteries for approximately 280,000 electric vehicles.
The reason behind SK on’s decision for this investment lies in the understanding that securing domestic production expertise is crucial for stabilizing overseas factories early on. Establishing a battery plant to improve yield, which means the ratio of defect-free products, to around 90 percent typically takes about three years. Adjusting raw material ratios and processes slightly based on local climate conditions relies heavily on the expertise of engineers. Given the rapid growth of the electric vehicle market, waiting for three years poses a challenge.
SK on envisions nurturing the Seosan plant into a mother factory. Through the establishment of a smart factory with digital transformation (DX) processes, the company plans to swiftly enhance the yield of global operations. Improving production efficiency is the “primary objective” for SK on, and it’s an essential task for the company.
In addition to SK on, other battery companies are also showing a strong interest in domestic mother factory investments. LG Energy Solution has decided to increase the production capacity of its Chungbuk Ochang Energy Plant from 20 GWh annually to 33 GWh. Samsung SDI is currently producing large batteries of 10 GWh annually at its Ulsan plant and has plans to expand production lines at facilities like the one in Cheonan.
This investment is also seen as a move to ramp up battery supply in sync with Hyundai Motor’s operation of a new electric vehicle factory in Ulsan by 2025. Hyundai Motor plans to produce around 200,000 electric vehicles annually at this plant.